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84 Pages

Global metallurgical coal long-term outlook H1 2015


Global metallurgical coal long-term outlook H1 2015

Report summary

The metallurgical coal market has experienced a continuation of lowering prices and stagnant demand. The quarterly contract price for low-volatile Australian coking coal has fallen from US$119/t in Q4 to US$93/t for the Q3 2015 and we anticipate very little recovery over the next few years.  Operating mines will be able to meet demand until 2023, when prices will require a more substantial boost to justify new mines.  Prices will reach about US$170/t by the end of our forecast in 2035.

What's included?

This report includes 6 file(s)

  • Global metallurgical coal long-term outlook H1 2015 PDF - 1.09 MB 84 Pages, 3 Tables, 75 Figures
  • CMS Met Coal Demand overview data June.xls XLS - 3.51 MB
  • CMS Met Coal Prices data June.xls XLS - 427.50 KB
  • CMS Met Coal Supply overview data June.xls XLS - 1.53 MB
  • CMS Met Coal Additional data June.xls XLS - 3.96 MB
  • CMS Met Coal Country Plant data June.xls XLS - 16.25 MB

Description

Global coal markets are facing extraordinary challenges and uncertainties. Factors such as global overcapacity, weakening demand and falling prices have created cautious investors. These factors have caused delays and cancellations of many mine and infrastructure projects, as well as lower growth rates at others.

This Metallurgical Coal Market Long Term Outlook report gives global and regional coal producers, consumers, transporters and investors detailed supply, demand and price forecasts for the coal industry, covering all the key domestic markets in North America, China and India.

Use this report to gain a better understanding of market dynamics, including revenue and demand potential for different coals. It will also help you identify trade patterns and changes affecting the metallurgical coal markets.

Wood Mackenzie is the only coal industry service provider that offers a market outlook integrated with other sector analyses, including macroeconomics, coal supply, steel markets and gas and power markets. Our coal analysts are based in the markets they analyse. They work with objective, proprietary data to help you maximise your current and future investments.

From market dynamics to trade patterns, we give you confidence in your strategic planning.

  • Executive summary
    • Chinese weakness to drive sentiment in near term
      • Property sector at heart of problem
      • Chinese government policies are distorting the market
      • Any short-term recovery will need to be supply driven
    • China is also part of the solution
      • Steel demand will begin to grow again
      • Domestic supply will decline
    • India needs to remove shackles constraining investment and project delivery before it can exert its influence
    • Forecast demand growth will provide opportunities in all supply regions
    • Most supply gains will be reaped by Australia
    • Current supply is sufficient to meet demand until 2023
    • Incentive prices will ultimately provide price support
    • Price differentials will revert to historic relationships as market recovers
    • Risks to the forecast
  • Economic outlook
  • Prices
    • Industrial overcapacity to cast a pall over markets for the next few years
    • Australian marginal costs will set prices through downturn
    • Chinese Government support for thermal coal producers inadvertently affecting the metallurgical coal sector
    • US supply will have to shrink
    • Balance will shift after 2018
      • China will play an important role in the recovery
      • Broader supply adjustment is also a pre-requisite for recovery
    • A lack of supply investment and rising import demand will create tight conditions early next decade
    • Price convergence will reverse post recovery
  • Demand
    • Chronic oversupply in Chinese property and industrial sectors at the heart of demand malaise
    • Steel demand to grow in China, but not coke demand
    • Urbanisation in India and China are still fundamental parts of our long-term view
    • If India reaches targets, seaborne metallurgical coal trade will expand by 40% by 2035
    • Pacific
      • China will need good quality coals, while India will increase proportion of weaker coals in blends
      • A trend towards lower volumes of quarterly-priced contract coal continues
    • China
      • Chinese government acting to help struggling domestic coal producers - steel overcapacity still strong
    • India
      • Numerous Indian blast furnace projects will increase seaborne demand
      • Over 100 Mt of new Indian demand by 2030
      • A move towards index-linked pricing
    • Indonesia
      • POSCO-Krakatoa will provide most of the BOF steel production
      • Indonesia will need to import high-quality coking coals
    • Japan
      • Japan's coal imports will decline over time
      • Tonnage settled on shorter-term pricing agreements will increase
    • South Korea
      • After having added Dangjin B BF, South Korean demand should remain relatively flat.
    • Taiwan
      • Flat demand forecast to 2035
    • Vietnam
      • Formosa Plastics steel mill opening in 2015
    • EMEARC
      • EMEARC seaborne imports will increase 11 Mt to 2035 – concentrated in Turkey, Ukraine, Italy and Germany
      • Australia maintains a stronger presence to EMEARC than in our previous update
    • Germany
      • Germany should need an additional 1 Mt of cokemaking capacity next decade.
    • Italy
      • Taranto's future still uncertain and Piombino could switch steel production to EAF
    • Turkey
      • Turkey is planning new blast furnaces and coke ovens.
    • Ukraine
      • Steel production not to return to 2013 levels until 2018, followed by strong growth
      • The growth in PCI coal adoption has slowed.
    • United Kingdom
      • Tata and SSI have invested in Skunthorpe, Port Talbot and Teesside operations
      • Import demand will rise by 1 Mtpa by 2035
    • Americas
      • US demand should remain flat to decline, most steel growth by EAFs
      • Brazil
      • Coal demand is expected to resume growth
      • Petrobras' issues have negatively impacted GDP
      • Steel export increases hope to allow production levels to remain flat
      • Usiminas idles two blast furnaces
      • Charcoal replacement for coking coal should rise
      • Mexico
      • Steel demand growth propelled by strong activity in US
  • Supply
    • Global supply will grow by a net 115 Mtpa by 2035
    • Australia is likely to gain the majority of new demand over the next 20 years.
    • Exchange rates have lowered costs (in local dollars) for nearly all producers outside the US
    • Lower oil prices have lowered costs, but also reduced the competitive position of US exporters
    • 2015 hard coking coal costs average US$89/t FOB, with Australian mines being most competitive
    • Australia is the standout competitor
    • Contrasting performances between majors and smaller miners
    • Investment and industry landscape changing
    • Mid-term competition will limit Australia's export growth
    • Opportunities remain greatest for PCI and SSCC
    • Low prices have driven Canadian mine closures
    • Lowered exports push Ridley terminal expansions into holding pattern
    • Production growth should rise after 2020, as numerous projects come on-line
    • US exports should decline by 10 Mt in 2015
    • High-volatile coals with strong fluidity fill important niche in market
    • US producers are feeling financial stress
    • Recent US metallurgical property sales have been divestments to smaller producers
    • US exports will average almost 39 Mtpa throughout forecast
    • Falling domestic coal prices challenge producers
    • Government lowers some tariffs to assist struggling producers
    • Small, inefficient mines are being closed
    • Most new met tonnes willl come from Shanxi Province mines, but beyond 2015 China's production falls
    • Oil price and rouble decline propel Russian exports
    • But market adjustments could limit export potential
    • Infrastructure and project development are key to reaching export potential
    • PCI exports likely to be volatile
    • Semi-soft producers are struggling
    • Difficult seasonal transportation setting for export coal
    • Domestic steel works have used a mix of local coal and Australian imports
    • The next few years could see a small uptick in domestic demand.
    • Indonesian exports to climb to 12 Mt by 2019
    • Mozambique is at a pivotal point for growth with new infrastructure
    • Coals have strong CSRs and good blending properties
    • Post-2020, Mozambique’s export forecast lower than in last update
    • Low prices constraining Mongolian supply
    • Government intervention has restricted investment, but is easing
    • There is still potential for large scale export expansion
    • Colombia struggling with high costs and transportation changes
    • Low seaborne prices cause reduction at New Zealand’s Stockton mine
    • Poland’s JSW shifting production to newly purchased mine
    • Czech producer New World Resources likely to close Paskov mine in 2017
    • Ukraine production still held back due to the conflict with Russia
  • Infrastructure
    • Ocean freight outlook
  • Trade
    • Hard coking coal’s share of seaborne trade will decrease to 2035
    • Australian exports will shift from China to India
    • Australia’s presence in Europe will start to wane after 2020
  • Supply-demand balances
    • Global demand will increase by 74 Mt, with growth profile defined by China and India
    • PCI use will increase from 16% to 19% over the forecast period
    • China use of local coals is nearly two-and-a-half times all seaborne trade
    • US domestic demand will decline due to recent switches to EAF
    • EMEARC countries consume about 60 Mt of non-traded coal
    • Landborne trade will climb, largely due to Mongolian moves to China
    • Seaborne-traded metallurgical coal is only about one-fourth of the global total
  • Risks and uncertainties
    • Weaker than forecast FX rates (vs. US$) would favour other supply regions
    • Chinese policies could further support for domestic coal producers
    • Lower Chinese steel demand would reduce import need
    • Indian demand could outperform in near term
    • Russian supply growth hinges on infrastructure projects
    • Indonesian supply development could be slower in the near term
    • Mongolian supply heavily dependent on Tavan Togoi development
    • US export level is dependent on price premium in Europe

In this report there are 78 tables or charts, including:

  • Executive summary
    • Top 10 seaborne metallurgical coal importers (Mt)
    • Change in seaborne metallurgical coal supply, 2015 vs. 2035 (Mt)
    • Hard coking coal market balance
    • Hard Coking Coal Incentive Prices FOB Port (US$/t 2015 Real)
  • Economic outlook
    • Exchange rate assumptions, selected currencies (local per US$)
    • GDP assumptions, selected countries (% growth, year-on-year)
    • Industrial production assumptions, selected countries (% growth, year-on-year)
  • Prices
    • HCC supply capacity versus demand (Mt)
    • Hard coking coal market balance
    • HCC supply versus demand
    • Marginal FOB cash cost of global LV HCC supply 2015 to 2035 (US$/t Real 2015)
    • Hard Coking Coal Incentive Prices FOB Port (US$/t 2015 Real)
  • Demand
    • World iron, steel, met coal forecast
    • Hot metal production by region (Mt)
    • Sources of hot metal production growth (Mt)
    • Seaborne metallurgical imports by region (Mt)
    • Top 10 seaborne metallurgical coal importers (Mt)
    • Asia-Pacific seaborne metallurgical coal demand forecast (Mt)
    • Hard coking coal demand pattern in the Pacific (Mt)
    • PCI demand pattern in the Pacific (Mt)
    • China - steel production and metallurgical coal imports (Mt)
    • China – global metallurgical coal imports by country (Mt)
    • India - steel production and metallurgical coal imports (Mt)
    • India - steel production and metallurgical coal imports (Mt)
    • Indonesia - steel production and metallurgical coal imports (Mt)
    • Indonesia - steel production and metallurgical coal imports (Mt)
    • Japan - steel production and metallurgical coal imports (Mt)
    • Japan - Seaborne metallurgical coal imports by country (Mt)
    • South Korea - steel production and metallurgical coal imports (Mt)
    • South Korea - Seaborne metallurgical coal imports by country (Mt)
    • Taiwan - steel production and metallurgical coal imports (Mt)
    • Taiwan - Seaborne metallurgical coal imports by country (Mt)
    • Vietnam - steel production and metallurgical coal imports (Mt)
    • Vietnam - Seaborne metallurgical coal imports by country (Mt)
    • Germany - steel production and metallurgical coal imports (Mt)
    • Germany - Seaborne metallurgical coal imports by country (Mt)
    • Italy - steel production and metallurgical coal imports (Mt)
    • Italy - Seaborne metallurgical coal imports by country (Mt)
    • Turkey - steel production and metallurgical coal imports (Mt)
    • Turkey - Seaborne metallurgical coal imports by country (Mt)
    • Ukraine - steel production and metallurgical coal imports (Mt)
    • Ukraine - Seaborne metallurgical coal imports by country (Mt)
    • United Kingdom - steel production and metallurgical coal imports (Mt)
    • United Kingdom - Seaborne metallurgical coal imports by country (Mt)
    • Brazil - steel production and metallurgical coal imports (Mt)
    • Brazil - Seaborne metallurgical coal imports by country (Mt)
    • Mexico - steel production and metallurgical coal imports (Mt)
    • Mexico - Seaborne metallurgical coal imports by country (Mt)
  • Supply
    • Seaborne metallurgical coal exports by country (Mt)
    • Change in seaborne metallurgical coal supply, 2015 vs. 2035 (Mt)
    • Hard coking coal cash cost curve 2015 US$/t FOB
    • Hard coking coal cash cost curve 2035 (US$/t FOB)
    • Metallurgical coal supply from Australia by demand country (Mt)
    • Metallurgical coal supply from Australia by quality (Mt)
    • Metallurgical coal supply from Canada by demand country (Mt)
    • Metallurgical coal supply from Canada by quality (Mt)
    • Metallurgical coal supply from US by demand country (Mt)
    • Metallurgical coal supply from US by quality (Mt)
    • Russian coal margins (2015 vs 2014)
    • Russian domestic coal index prices (US$/t)
    • Metallurgical coal supply from Russia into demand countries (Mt)
    • Russia - seaborne metallurgical coal exports by quality (Mt)
    • Metallurgical coal supply from Indonesia into demand countries (Mt)
    • Indonesia - seaborne metallurgical coal exports by quality (Mt)
    • Metallurgical coal supply from Mozambique into demand countries (Mt)
    • Mozambique - seaborne metallurgical coal exports by quality (Mt)
  • Infrastructure
    • Baltic Dry Bulk Index history
    • Net increase in vessel fleet (Mdwt)
    • Bunker price in Northern Europe vs Brent oil price
    • Bunker price in Singapore vs Dubai oil price
    • Time Charter rates vs bunker prices in the Pacific region
    • Baltic Capesize Index
    • Dry bulk trade net Increase (Mt) and 4TC Average Baltic Cape size Index
    • Dry Bulk Carriers’ fleet distribution by year of build (MDWT)
  • Trade
    • Asia-Pacific seaborne metallurgical coal import demand (Mt)
    • EMEARC/Americas seaborne metallurgical coal import demand (Mt)
  • Supply-demand balances
    • Global metallurgical coal supply demand balance (Mt)
    • Global metallurgical coal supply demand balance by country (Mt)
  • Risks and uncertainties
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