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A return to marginal costs: Global metallurgical coal long-term outlook H2 2016

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12 December 2016

A return to marginal costs: Global metallurgical coal long-term outlook H2 2016

Report summary

After a sharp rise in metallurgical coal spot prices in H2 2016 to over US$300/t driven by China’s 276 workday/year restriction, global supply is returning. China relaxed its work rule, Australian longwall mines have returned and others globally are expanding. We expect prices will return to near marginal costs over 2017, rising to about US$120/t by 2035.

Table of contents

  • Executive summary
    • Prices will stay elevated into 2017, but return to global marginal cost
      • Returning supply should re-balance market quickly
      • Prices will stay flat through the mid-term due to sluggish demand
        • Incentive price (adjusted to HCC benchmark), US$/t real 2016
      • Price banding, a new feature of this update
        • High/low price ranges: FOB Queensland LV HCC (US$/t, real 2016)
      • Supply is now returning; and Australia will win most long-term growth
      • New tonnes will enter trade, chasing the current high prices
      • Long-term growth will mostly captured by Australian producers
        • Global seaborne supply forecast 2016 to 2035 (Mt)
    • Two countries dominate demand story:China in near term and India in long term
      • We expect global demand to rise by 70 Mt to 2035
        • Global Seaborne Demand Forecast 2016 to 2035 (Mt)
      • Chinese domestic supply pivotal to seaborne met trade growth
      • Chinese steel demand will fall
      • Steel and hot metal production will also fall
      • China’s mining reforms will continue to influence global trade
      • India still of primary importance, despite downgrade to long-term forecast growth
    • More upside than downside risk
      • China’s moves to control domestic production likely to add uncertainty
      • India’s steel production growth could develop more slowly
      • A stronger US dollar would lower US$ mining costs in other supply regions

Tables and charts

This report includes 10 images and tables including:

  • Prices: Image 1
  • Prices: Image 2
  • Prices: Image 3
  • Prices: Image 4
  • Prices: Image 5
  • Prices: Image 6
  • Prices: Image 7
  • Prices: Image 8
  • Supply: Image 1
  • Demand: Image 1

What's included

This report contains:

  • Document

    cms met coal prices data H2 2016.xls

    XLS 2.07 MB

  • Document

    Presentation global metallurgical coal long-term outlook H2 2016.pdf

    PDF 1.81 MB

  • Document

    A return to marginal costs: Global metallurgical coal long-term outlook H2 2016

    PDF 373.34 KB

  • Document

    A return to marginal costs: Global metallurgical coal long-term outlook H2 2016

    ZIP 2.33 MB

  • Document

    Executive summary

    PDF 79.82 KB

  • Document

    Prices

    PDF 161.92 KB

  • Document

    Supply

    PDF 92.81 KB

  • Document

    Demand

    PDF 105.40 KB

  • Document

    Risks and uncertainties

    PDF 80.96 KB

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