Japan and Europe are moving more power generation to coal fired units to offset the impact of high natural gas prices in the international markets. Coal fired generation is up 26 percent in Japan, and is up 14 percent in Europe despite economic contraction in the Eurozone. Germany has 36 gigawatts of power generating capacity planned, and two-thirds of that will be coal fired.On the back of slowing demand for steel, mills began reducing their inventories of iron ore and met coal. This lower demand temporarily drove down prices to below $90 per dry metric ton for iron ore and to $140 per tonne for metallurgical coal, both below their marginal cost of production. We believe the destocking phase is completing and the price for both commodities is improving. China produces 40 percent of global iron ore, and is the high cost, swing producer. As a result, iron ore has corrected more quickly than met coal and is trading in the vicinity of $120 per tonne, which is the estimated cost of China production. This pricing level limits China production, but provides healthy margins for the major seaborne producers. Metallurgical coal prices rolled over in the fourth quarter, but are to improve in 2013.
Joy Global Inc. Announces Fourth Quarter And Fiscal 2012 Year-End Operating Results
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts