Despite the price reversal of March and April, metallurgical coal trade will continue to be undermined by weak demand. India's modest demand growth will continue, but will be countered by losses in Japan and China, resulting in a flat outlook for hard coking coal (HCC) into early next decade. HCC prices will remain sluggish, ranging from US$87 to US$94/t through 2023. China’s supply-side reform in steel and mining threatens a period of high volatility in met coal demand and pricing. Combined with Anglo's imminent departure from the trade - and prospects of greater spot activity - we expect prices to fluctuate more frequently than in the past. Ultimately, India's growth trajectory will determine the rate and timing of a recovery in prices. For those miners that remain, the long-term future is brighter. Prices will recover to between US$115/t to US$120/t (in real terms) once consistent demand growth requires new greenfield development post 2027.
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Global coal markets are facing extraordinary challenges and uncertainties. Factors such as global overcapacity, weakening demand and falling prices have created cautious investors. These factors have caused delays and cancellations of many mine and infrastructure projects, as well as lower growth rates at others.
This Metallurgical Coal Market Long Term Outlook report gives global and regional coal producers, consumers, transporters and investors detailed supply, demand and price forecasts for the coal industry, covering all the key domestic markets in North America, China and India.
Use this report to gain a better understanding of market dynamics, including revenue and demand potential for different coals. It will also help you identify trade patterns and changes affecting the metallurgical coal markets.
Wood Mackenzie is the only coal industry service provider that offers a market outlook integrated with other sector analyses, including macroeconomics, coal supply, steel markets and gas and power markets. Our coal analysts are based in the markets they analyse. They work with objective, proprietary data to help you maximise your current and future investments.
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Change in Chinese government approach leads to lower forecast economic growth
Demand adjustments in other regions
Less imported coal means fewer projects needed to fill demand
Hay Point LV marginal cost of supply H2 2015 versus H1 2016 (US$/t)
China's attempts to rebalance steel and mining sectors will shape the trade in met coal
Indian infrastructure sector is key to long-term growth
Some growth opportunities exist for suppliers
Hard coking coal supply-demand balance and mine category (Mt)
The metallurgical coal supply industry remains in the process of ridding itself of debt, and of high-cost production. The trend began slowly as most suppliers looked to reduce costs and ride out the downturn. But as weak prices persist, and the outlook remains bleak. a greater number of operations have been placed on care and maintenance, or have had their decommissioning brought forward.
US met coal sector undergoing a transformation
The rapid price rise, and subsequent fall, in the early part of this year have highlighted some subtle changes occurring in the trade. The supply side of the premium HCC trade is tighter than it has been for a number of years, and was unable to respond to the short-term jump in China demand seen earlier this year. While insufficient to prolong prices at US$100/t, we expect premium HCC supply to be intermittently tight, if volatility in demand occurs.
Volatility to continue
Underlying weak demand persists through 2020
Australian versus Global LV marginal costs (US$/t)
Prices constrained until India expands
Rate of decline in China's steel and mine capacity
Environmental policies could make BOF steel route less competitive
Indian coal demand grows faster than expected
In this report there are 6 tables or charts, including:
Executive summary: Image 1
China crude steel production 2016 to 2035 – H1 2016 versus H2 2015 (Mt)
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Commodity market report | Jun 2016
Global metallurgical coal long-term outlook H1 2016
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