Fears that coal prices would continue falling are becoming a reality, with Wesfarmers on Tuesday confirming that it has lowered its contract sales prices yet again.
Wesfarmers has told the ASX that coking coal from its Curragh mine in Queensland will sell for about 16 per cent less in the June quarter than it did in the March quarter, exacerbating a price environment that already has some Australian producers running mines at a loss.
The falls had been foreshadowed by Wesfarmers boss Richard Goyder last week during the conglomerate’s quarterly results.
During those results, Mr Goyder said “a majority” of coal producers would be financially challenged at current prices, but he said that Wesfarmers was committed to the industry and would ‘‘wait it out’’. Wesfarmers shares rose 25¢ higher to $43.50 on Tuesday morning, despite the revelations made by the ACCC on Monday about the culture of squeezing suppliers that has existed at its supermarket chain Coles in recent years.
Coking coal was selling for around $US105 per tonne in the March quarter, but there are fears the benchmark price could fall into single figures during the June quarter.
Thermal coal prices have also been in the doldrums, fetching in the low $US70 per tonne in recent times.
The pessimism toward coal prices seems widespread across the industry, with BHP Billiton’s energy boss Dean Dalla Valle recently saying there was no relief to the weak coal prices in sight.
“It is tough out there and it is hard to see any relief in the short term, certainly when you’ve got such strong supply,” he said.
“The long-term fundamentals for the products are there, but at the moment we have short-term overhangs of supply so the industry will have to shake itself out, as it will one way or the other.”