In its latest Base Metals Monthly Watch, CIBC notes that on May 28, the seaborne metallurgical coal price saw its largest rise since November 4 of last year.
The price of spot FOB hard coking coal from Australia gained $1.90 to reach $85.20 per tonne. Though that's still well below where met coal was at the start of the year — around $110 per tonne — CIBC states that it's gaining confidence that met coal's 11-year low of $81.15 "will not be tested again." "In the coming months, we see an eventual constructive dynamic for the met coal market and expect that at current spot prices of ~$85/t, further production cuts will have to be made by higher-cost producers," the report reads. "Ultimately, this should prove positive for coal pricing." CIBC estimates that about 25 percent of global seaborne met coal production is "underwater on a cash cost basis at current spot prices," adding that roughly 40 million tonnes of production have come offline in the past few years. Indeed, low prices forcing production offline has been a running theme in the coal space as of late. Joe Aldina of Wood Mackenzie said back in September that although coal producers have held against ever-falling prices by continuing to cut costs, he didn't see costs going appreciably lower, and anticipated some producers "finally, at long last" dropping out of the market. However, "finally" is the operative word there. CIBC, Wood Mackenzie and other firms have noted that coal producers held on longer than expected in the face of falling prices, and that the slower-than-expected response has weighed on coal forecasts.