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Why Are Exports of This Key Commodity Down 56%?

The globe continues to see major structural changes in one particular commodity market these days.

Thermal coal.

Over the last few years, production has been rising rapidly from places like Indonesia and Australia. Recently overwhelming increasing demand from markets like India and Japan--and resulting in a fall in worldwide prices, back to multi-year lows.

That's now causing a number of additional shifts. With miners in Indonesia, for example, reportedly struggling to stay alive in many cases, after seeing profit margins squeezed to nothing.

And we got another "sign of the times" in the space this week. From the coal export market that lies closest at hand to major consuming nations in Asia.

That's Canada. Where numbers show that coal exports are tumbling, as the market continues to realign itself.

The figures come from the Ridley Terminal in Prince Rupert, on Canada's west coast. With the terminal reporting that its August coal exports fell 56%, compared to year-ago levels--to just over 462,000 tonnes on the month.

The drop was largely caused by thermal coal shipments, which plunged 81.5% to just over 80,000 tonnes. Metallurgical coal shipments also dropped by 41%, to 305,000 tonnes.

This is an especially telling data point given that the Ridley Terminal is the closest North American export point to Asia. Suggesting that key Asian markets are reducing their purchases of North American coal.

This may simply be a matter of economics. With potentially better-prices coal being available from low-cost producing nations like Indonesia.

It may also have to do with uncertainty prevailing in the market right now over coming changes to China's coal import laws. Which reportedly may ban shipments of certain lower-quality coals.

Whatever the reason, this is one more sign that the coal market is going through some big changes. Which of course is challenging for producers seeing lower demand, as Canadian and U.S. suppliers appear to be. But it could also be an opportunity for well-positioned producers to grab more market share--especially given that coal demand is still strong and rising in key markets like India.

Here's to getting the right coal to the right place,

Dave Forest




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