North American coal producers and shippers should expect a “U-shaped” recovering in the metallurgical coal market, not a V-shaped one.
That’s one of the messages Joe Aldina, a New York-based coal analyst for Wood Mackenzie, has for coal industry leaders attending the Coal Association of Canada’s two-day conference, which started today (September 11) in Vancouver.
Metallurgical or coking coal – used in making steel – is B.C.’s single largest bulk export, according to the provincial government, accounting for 27,000 jobs.
Miners and shippers in B.C. took a major hit earlier this year, when a global glut forced major producers in B.C. to either idle coal mines or postpone planned restarts.
Several hundred B.C. coal miners have been laid off as a result of closers by Walter Energy Inc. (TSX: WLT).
Vancouver-headquartered Teck Resources Ltd. (TSX:TCK) has managed to keep its met coal mines in B.C. operating, but has deferred the planned restart of the Quintette coal mine.
Since late 2011 the markets have been in decline, thanks to a glut from over production and general lower economic demand.
Despite Walter Energy’s curtailments here in B.C., Canada has not been as hard hit as the U.S.
“Canada’s actually in a pretty good spot when you look around the world, overall,” Aldina told Business in Vancouver in a pre-conference interview.
Whereas 10 million tonnes has been taken out of production in the U.S., in Canada Walter’s curtailments only amounts to about 2 million tonnes, Aldina said.
“Canada’s had to cut back a bit, but really, compared to their peers, they haven’t suffered as badly,” he said. “Even if you look at 2025, you look at long time horizon, Canada still remains well positioned – one of the most competitive players in the seaborne metallurgical coal markets.”
Aldina said a met coal prices are expected to eventually rise, but the recovery will likely be slow.
“We have a positive view that prices over the next few years will rise incrementally,” Aldina said. “We’re talking years, not months.”
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