Flooding in 2010‐11, proved to be worse than in 2008, taking at least 25 Mt out of the market and pushing the Q1 2011 contract price to US$330/t. At that time, the US coal industry, which is the classic swing supplier to the seaborne market, was able to respond quickly. Shipments from the US to Asia increased from about 5 Mt in 2010 to 18 Mt in 2011 to make up for lost supply from Australia.
PRICE DECREASE AND MINE CLOSURES 2011 TO EARLY 2016
As the Australian pits dried and production resumed, prices fell back to pre‐flood levels and then continued to decline as miners in Queensland pushed output in order to lower costs and win back market share. These efforts were assisted by a weakening of the Australian dollar to the US dollar. As a result, between 2012 and 2016 costs fell by nearly 50% and price dipped to below US$80/t. By early 2016, about 20 Mt of high‐cost production had been shuttered and the market was in better balance on volume.
CHINA ADDS WORKDAY LIMITS AND AUSTRALIAN MINES EXPERIENCE OUTAGES
Then in April 2016, China imposed a 276 day‐per‐year work restriction on their mines to combat overcapacity. As a result, total Chinese production, met and thermal, during the first seven months of 2016 was down about 10%. This move caused the spot market up to climb to about US$100/t.
But, the big driver came in mid‐July and early August, when a number of heavy storms hit northern China and damaged the highway network and railroads. The resulting domestic supply shortage translated to more demand from the seaborne market.
In addition to the closures necessary to generally balance the market, a number of Australian producers were having their own mining issues. Then, the Grasstree and Appin longwall mines declared force majeure. Together these two operations account for about 10 Mtpa of production, a loss approaching the magnitude during the Queensland floods. Many of the US producers, who came to the rescue when Asian steelmakers needed replacement coal in 2011, were sold out for 2016. So, spot prices increased rapidly to about US$315/t in November 2016.