Slowing growth in emerging markets will place downward pressure on coal prices
Los Angeles, CA (PRWEB) March 02, 2013
Coal Mining industry performance has deteriorated slightly over the five years to 2013, with revenue expected to decline an average 0.3% annually to $10.6 billion. According to IBISWorld industry analyst Agiimaa Kruchkin, strong demand from steel production abroad and moderate increases in electricity demand have pushed coal prices up, boosting industry performance. Emerging economies rapidly investing in infrastructure are demanding metallurgical coal (i.e. coal needed for steel production) at accelerating rates, thus helping revenue over the past five years. Nevertheless, the prices of steaming and metallurgical coal plummeted in 2009 and 2012, cutting industry revenue. The 2009 price drop resulted from the recession; the 2012 drop was largely due to Australian coal reentering the market after the 2011 floods, the emergence of natural gas as a substitute in electricity generation and the slowing Chinese economy that reduced demand for steaming coal. In 2013, the industry is expected to recover on the back of rebounding coal prices, causing industry revenue to grow 10.8%.
High demand for metallurgical coal has encouraged new entrants into the coal mining industry. Metallurgical coal in Canada is highly sought after because of its perceived superior quality. Consequently, the number of mining companies has grown remarkably at an annualized rate of 10.5% over the five years to 2013, totaling 28 enterprises. The two largest companies in the Coal Mining industry are Teck Resources Limited and Sherritt International Corporation. Industry concentration has increased substantially over the past five years as coal mine operators acquired additional reserves to meet surging export demand. Strong demand from markets in Asia has underpinned this growth; as a result, major players have looked to increase their holdings of premium-priced metallurgical coal, which is used to produce steel, continues Kruchkin.
The next five years will likely be gloomy for the industry. Coal prices are expected to drop during four of the next five years, as slowing economic growth in major global markets (e.g. China) places downward pressure on product prices. Although emerging economies will still demand metallurgical coal at high rates to satisfy their need for steel, the level of demand is unlikely to rival the prerecession levels. Consumption of electric power is projected to expand, offering some relief to industry operators. Nevertheless, the slower growth of emerging economies will hurt demand for metallurgical coal and will cause the price of coal to stagnate. Furthermore, natural gas will continue to eat into coal demand over the next five years, as the appetite for alternative sources of expands globally. For more information, visit IBISWorld’s Coal Mining in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry mines bituminous, anthracite and lignite varieties of coal. Mining occurs underground and in surface pits. Industry operators may also develop coal mine sites and prepare the coal for sale by washing, screening and sizing it.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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