By James Wellstead — Exclusive to Coal Investing News
"Chinese demand is less positive and there's more US coal coming in due to availability of cheap shale gas there. Also, there's an oversupply situation even in Indonesia," Platts reported.Until demand returns in many of Asia and America's markets, cutting production appears to be the most effective strategy for companies producing in high-cost areas such as the Appalachian basin. Low-cost producers have the benefit of remaining operational to meet what was once seen as a persistent and unquenchable Asian appetite for coal power, but whether producers can continue to keep costs low enough in this era of cheap gas remains to be seen. Platts recently assessed the daily 90-day prices for FOB Kalimantan 5,900 kcal/kg GAR at US $90.35/MT and 5,000 kcal/kg GAR at $70.40/MT, both down ten cents on April 25. Higher-grade FOB Newcastle 6,600 kcal/kg thermal coal has also fallen precipitously this year, off by 17 percent since the beginning of the year on weak Chinese demand, settling at US $103.25 on April 24 according to globalCOAL data. Company news Diversified miner Teck Resources (TSX: TCK.B) reported a twelve percent increase in quarterly operating earnings earlier this month on the back of strong coking coal pricing and volumes which offset the impact of sharp declines in its other business units. Teck reported that its coal segment benefited from investments in new mining equipment and plant upgrades, which helped reduce fixed costs and boost output by 43 percent in the quarter. The success of its coal operations flies in the face of China's perceived continued downturn as Teck said the developing nation could be on track to hit record steel production figures in 2012. Coking coal prices have surged in recent months, carried by reports of an upcoming ten percent growth in China's steel production, which have carried price forecasts up almost US $20/ton by June 30 to $225/ton.