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Global metallurgical coal long-term outlook H1 2018: Price strength continues

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20 June 2018

Global metallurgical coal long-term outlook H1 2018: Price strength continues

Report summary

China is expected to keep supporting strong coal prices to allow coal companies to deleverage. Steel reforms there have led to higher capacity utilization rates and greater demand for high-quality coking coals. These factors will mean more stable demand for seaborne coals. As a result, we extended the period of strong pricing to 2021 - before it falls closer to marginal costs. The long-term outlook is dominated by demand growth in India and the need for projects to come online to meet demand.

Table of contents

    • Our short-term forecast has changed
    • Deleveraging the public coal mining sector is a slow process
    • Coal production started well in 2018 but there are major challenges
    • Consolidation is being slowed by a lack of investment
    • The investment response to high prices has been slow
    • 2018 – 2021: China's influence and faltering supply will overcome a flat demand outlook
    • 2022-2030: Prices flirt with the marginal cost of supply
    • Prices will find support close to life of mine break-evens
    • Project lag creates mini-spike by 2026
    • 2030-2040: Project requirement accelerates
    • Key long-term demand trends include:
    • India
    • Infrastructure the key long-term demand issue
    • BOF the preferred route
    • PCI and semi-soft use will grow markedly over the long term
    • China: Will coking coal supply and demand decline at the same rate?
    • Increasing blast furnace size will entrench lower coke rates and higher CSR
    • Reduction in premium HCC coals in China will force some tough decisions
    • What can Chinese coke makers do?
    • The growth in trade is both an opportunity and a challenge.
    • Chinese strategy to combat a shrinking metallurgical coal sector
    • Decarbonisation
    • Exponential Indian growth could remain a pipe-dream
    • Alternate Iron production processes

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    Global metallurgical coal long-term outlook H1 2018: Price strength continues

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