Thermal coal: Surprises in the seaborne market in 1H11 :: Macquarie Research,

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Thermal coal: Surprises in the
seaborne market in 1H11
Feature article
 While thermal coal pricing has been relatively stable of late, there have been
some surprising swings in demand and supply; most notably, the strength of
US thermal exports and the magnitude of the increase in Indian imports.  This
is set against a backdrop of what is likely to be strong demand in 4Q11/1Q12,
which we think should support strong pricing.
Latest news
 Base metals were mixed this week, recording either modest falls like copper
(-0.5% WoW) or gains like lead, nickel and zinc. Lead and nickel saw small
gains in open interest through the week, while the drop in zinc open interest
coupled with rising prices suggest short covering.
 US Durable goods orders were better than expected in May, with orders ex
defense and aircraft rising by 1.6% MoM. Unfilled orders also rose, by a strong
2.5% MoM. These data should shore up expectations for equipment spending
in 2Q in the US and paint a better picture for manufacturing than suggested by
the recent leading indicators. That said, the risk to the key ISM index still
appears to be to the downside given regional surveys in the month to-date.
 This week, over 100 key commercial figures from the copper, zinc and lead
mining and smelting industries, along with major traders and others, gathered
in Toronto for the "Concentrates Classic", an annual event now well
established on the calendar and comprising meetings to discuss the state of
the markets and a golf day (won, we understand, by a team that included
representatives from Teck, Ocean Partners and Agnico). The overall mood on
physical market conditions was reported to be firmly upbeat and in contrast to
the negativity in broader macro economic news flow of late. Premiums remain
firm for the time of year, and views on the outlook for the months ahead were
mainly optimistic.
 The China Coal Times has reported that stocks at key IPPs were 64.63mt on
20 June, enough for 17.9 days of consumption, according to logistics provider
Zhong Neng.  Stocks in eastern and southern China were lower at 14 days of
consumption, although other data from the China Coal Resource suggest that
stocks are closer to 17 days of consumption.
 Platmin has suspended mining operations at its Pilanesburg platinum mine
after a contractor dispute led to the damage of property and mining
equipment.  Processing operations are reported to have been unaffected,
processing mine stockpiles.  Pilanesburg produced 39koz of platinum in 2010,
and Platmin looks to ramp to 12,000koz of 4E PGM ounces per month by the
end of 2011.
 At the McCloskey Coal US conference, Shin Niwa from IHS noted that every 1
degree increase in temperature in Japan will add 0.8GW to power demand,
while the Tohoku Electric Area is likely to have a 4% shortage in the summer
under usual demand conditions. However, 3GW of potential residential
demand savings appear likely, and thus we remain confident that Japanese
industrial output will continue to rebound.