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Global coal roundup: A weekly review of top international stories

A roundup of international coal news from Dec. 12 to Dec. 19

Metallurgical coal market observers say the first-quarter 2017 met coal benchmark settlement of $285/tonne could represent the top of the largely supply-driven market.

"I suspect that the peak has been reached," Doyle Trading Consultants CEO Hans Daniels told S&P Global Market Intelligence on Dec. 12. "With little demand growth and relatively weak global economic growth, this rally has originated solely from a supply deficit. With Chinese mining controls easing, new and expanded coking coal projects on the horizon, and mine outages resuming [production], rising coal prices will face a headwind barring an unforeseen event such as weather, strike, regulation, [or a] mine shutdown."

Among the new projects, Daniels listed the Acosta deep mine owned by Corsa Coal Corp., which is scheduled to begin production by the second quarter of 2017, and the $90 million that Ramaco Development LLC announced in September that it is investing to open mines in Central and Northern Appalachia. Daniels also said South32 Ltd. is scheduled to bring its Appin Area 9 longwall mine back online at the end of December. Production at the mine had been suspended due to elevated gas concentrations. Remedial work the company had expected to take a month followed the state-mandated suspension.

North America

Canada: Canada's annual electricity demand is expected to jump 19% above 2015 levels by 2040, an increase of 386 terawatt-hours. And the country's National Energy Board anticipates that any associated capacity gap will be filled with more renewable and natural gas-fired generation. About 14.1 GW of existing capacity — made up of approximately 8.5 GW of coal, 3.2 GW of nuclear, 1.6 GW of natural gas and 0.7 GW of oil-fired generation — is expected to retire before 2040. Coal's share of capacity will drop from 7% in 2015 to 1% in 2040 as a result of policies intended to phase out the burning of coal for electricity.

Canada's first ministers met in Ottawa recently to discuss new targets for reducing the country's greenhouse gas emissions. The ministers, with the exception of Saskatchewan Premier Brad Wall, released the results of those meetings, the Pan-Canadian Framework on Clean Growth and Climate Change, on Dec. 9. The overall goal is to meet or exceed a 30% reduction in greenhouse gases below 2005 levels by 2030. As part of those efforts, Prime Minister Justin Trudeau has mandated the closure of coal-fired generators across the country and has been working out compromises and plans with individual provinces to meet that directive. New Brunswick most recently released the first steps of its plan to phase out coal.

Europe

United Kingdom: A site near Kellingley colliery, the last of the U.K.'s underground coal mines to be decommissioned, is set to become home to a 7-MW methane extraction operation, run by Harworth Group in partnership with Arevon Energy, Solar Power Portal reported Dec. 19. The solar farm is Harworth’s 10th in the UK and will bring the brownfield land developer’s installed solar capacity to 62.8 MW when complete.

Germany: Germany expects to miss its target of slashing emissions by 40% in 2020, with the additional measures decided upon with the "climate action plan 2020" proving insufficient to reduce the country's carbon footprint. Despite this, additional climate measures have been postponed until after the next federal election. Germany is currently on track to cut its emissions by 37.0% to 40.4% in 2020, up from a 27% cut in 2015 compared with 1990 levels.

Australia

Vale SA agreed to sell its stake in the Carborough Downs coal mine as well as several undeveloped adjacent tenements, including the Red Hill and Ellensfield coal deposits in Queensland, The Australian Financial Review reported Dec. 12, without specifying its source. The buyer, coal billionaire Hans Mende's coal vehicle, Fitzroy Australia Resources, acquired the assets for an undisclosed amount, according to the publication. The deal also included the Broadlea coal mine, which is under care and maintenance.

Asia

China: Seaborne thermal coal imports by China have so far reached 17.79 million tonnes in December, a strong indication that they are likely to match the strength of October and November, and remain robust in early 2017, Reuters reported Dec. 14. Seaborne coal imports in October and November clocked in at 20.13 million tonnes and 20.49 million tonnes, respectively, according to the report, citing data from Thomson Reuters Supply Chain and Commodity Forecasts. However, the possibility for seaborne thermal coal prices to rally is marginal, due in large part to competition with declining Chinese domestic prices. The National Development and Reform Commission recently asked producers to set a ceiling for the price of their contracts in a bid to control burgeoning coal prices.

Japan: Japanese steel mill Nippon Steel & Sumitomo Metal Corp. and mining company Glencore Plc have settled the January to March premium hard coking coal price at $285/tonne FOB Australia, the highest in more than five years, several parties familiar with the negotiations said Dec. 12. The first-quarter 2017 price is $85/tonne higher than the fourth-quarter price of $200/tonne FOB Australia. The prime hard coal settlement applies to Glencore Plc's flagship premium mid-vol brands produced at the Oaky Creek and Oaky North mines. If recognized by other international steelmakers as the first-quarter benchmark, the price would be the highest since fourth-quarter 2011.

As of Dec. 14, US$1 was equivalent to 6.90 Chinese yuan.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.

This feature was updated as of 01:30 p.m. ET on Dec. 19. Some external links may require a subscription.