COLUMN-Rio's Mozambique debacle sows seeds of next commodity boom : Russell

jueves 31 de julio de 2014 06:06 GYT

--Clyde Russell is a Reuters columnist. The views expressed are his own.--

By Clyde Russell

LAUNCESTON, Australia, July 31 (Reuters) - While it's easy to point the finger of blame at Rio Tinto's former management and feel a tad smug about their downfall, the real lesson of the company's humiliating exit from its Mozambique coal assets is that the wheels of the next commodity boom are now in motion.

This may seem counterintuitive at first, as once all the arguments over Rio Tinto's wisdom of paying $4 billion to gain a foothold in Mozambique are stripped away, it comes down to the fact that weak coal prices made it uneconomic to spend any more to develop the mines and infrastructure.

Oversupply in the coal sector has been a chronic problem, and given the amount of mine capacity that is currently under-utilised, it's likely that prices will struggle for some time to come even if optimistic demand projections are met.

When Rio bought Riversdale's Mozambique assets in 2011, thermal coal prices at Australia's Newcastle port, an Asian benchmark, had peaked at $136.30 a tonne in January of that year. Coking coal reached an eye-watering $330 a tonne at mid-year.

Since then, prices have plunged. Newcastle thermal coal is currently $67.89 a tonne, while Australian spot coking coal fetches about $114 a tonne.

These prices alone ensure that developing Mozambique's rich coal basins isn't viable, given that billions of dollars still has to be spent expanding rail capacity and port infrastructure.   Continuación...