Drop in coal price 'won't last long'

“The company estimates the drop in the world’s coal prices will be for the short term, because as much as 30 million tonnes of low-quality coal has been sold in the market at low prices. This situation cannot last for long,” said Banpu chief financial officer Somruedee Chaimongkol.
The drop in Banpu’s stock price resulted from fears over the coal-price fluctuation, she said. This caused foreign funds gradually to sell Banpu shares until their proportion of shareholding dropped below 50 per cent. In addition, these funds are concerned about the economic slowdowns in the European Union and the United States, resulting in lower spending on consumer products and coal consumption.
Banpu shares in February hit their lowest level in 30 months, falling 32 per cent to 688 points. Yesterday, however, the stock rose Bt6 or 1.2 per cent to close at Bt470.
“Banpu’s major export market is the Asia-Pacific region, where demand for high-quality coal grows 5 per cent annually,” she said.
Regarding the cancellation of deliveries of advanced coal orders from China as a result of the falling price, Somruedee said those were by traders, not end-users. This would not affect Banpu, she said, as its coal clients are large traders, not small ones.
The average price of coal this year was expected to be in line with the firm’s forecast of US$97 per tonne, she said. 
However, the company has benefited from falling oil prices, which have lowered production costs and kept its gross margin at 48 per cent. Earnings before interest and taxes (EBIT) were about Bt30 billion a year, and it has sufficient cash flow to cover its debts and upcoming investments, Somruedee said.
Banpu targets coal production capacity next year of 30 million tonnes from Indonesia and 17 million tonnes from Australia. In 2014, it expects to produce 62 million tonnes in Indonesia and 18 million tonnes in Australia.