Thermal coal Prices near Record Lows

Physical coal prices were mired near record lows this week as slower economic growth in top consumer China dented the outlook for demand, although some production cutbacks by the world's biggest thermal coal exporter Indonesia helped check losses.

Thermal coal benchmarks hit record lows earlier this month due to a sharp slowdown in demand, especially in Asia, and with overall mining output remaining stubbornly high.

Prompt prices for Australian coal cargoes from its Newcastle terminal fell 20 percent between late April and early September and have moved sideways since. They settled at $57.75 per tonne on Tuesday on slow demand from China.

China imported 6.39 million tonnes of coal from its top supplier Australia in August, down 12.8 percent on the year, and January-August coal imports were down 31.3 percent over the same period last year.

However, preventing an even bigger drop in coal prices was a slow cutback in output by Indonesia.

"Indonesian supply is acting as the balancing item in the seaborne thermal coal market," Australian bank Macquarie said, adding that Indonesian coal exports were down 11 percent year-to-date. Despite this, the bank said the outlook for coal prices remained bleak.

"We see prices as having further downside. First and foremost, costs have arguably been falling faster than prices this year ... Second, thermal coal is a market lacking a demand-story," Macquarie said.

A bleak global economic outlook is also expected to weigh on prices. The World Trade Organization (WTO) cut its forecasts for global goods trade on Wednesday after quarterly growth turned negative, with trade shrinking by an average of 0.7 percent in the first two quarters of this year.

The WTO sees world trade growth of 2.8 percent this year and 3.9 percent in 2016, revised down from the forecasts it made in April of 3.3 percent and 4.0 percent, respectively.

Hit by a slowdown in orders from India, where local miners have increased their production, South African cargoes from its Richards Bay terminal have also been falling.

South African coal is almost 30 percent cheaper versus April levels and closed at $50.95 on Tuesday, close to its record $50.90 low reached earlier in September and below levels seen during the 2008/2009 financial crisis.

European cargoes to its main ports at Amsterdam, Rotterdam and Antwerp terminals are down over 10 percent since April to $53.90 a tonne on Tuesday, dragged by sluggish European demand growth and strong renewable power output.

By Henning Gloystein