Commodity Market Report

Global metallurgical coal long-term outlook H2 2018: Challenge for supply as demand grows

Robin Griffin

12 December 2018

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*Please note that this report only includes an Excel data file if this is indicated in "What's included" below

Why buy this report?

Get coal price forecasts and analysis of the factors that will influence price to 2040.
Get supply, demand and market analysis from our global team of experts, including the restructuring of China's coal mining sector and the challenges faced by Australia, the US and Canada in meeting demand.
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What's changed since our H1 2018 update?

Our view of major price trends has not changed markedly since our last update. However, we have made some changes to reflect differences in our forecast of supply and demand. We still expect prices to fall from their current highs in the medium term; but, we have slowed the decent towards the cost of global supply by one year. This change means that HCC prices will on average stay above US$150/t until 2023. The change reflects our view that supply of premium HCC will take longer to expand and meet the global need than we had previously forecast.

Report summary

China's unique restructure of its steel and coal sectors has transformed the recent prospects of the world's coal suppliers. But what happens if China's objective's change, and when demand for coke and coking coal inevitably begins to fall? Fortunately, the pursuit of better environmental outcomes and the quality of international coals will insulate the seaborne trade from falling demand in maturing economies in north Asia, at least through the next decade. But most importantly, Indian growth will help push the metallurgical coal trade above 400 Mtpa by 2040. With suppliers of premium hard coking coal already struggling to sustain production growth, the potential of future supply shortages is high. Prices are likely to remain above the marginal cost of global supply in the long term.

Introduction
Changes to our forecast
2018 – 2020: Fundamentals show little change
2020-2023: Price transition
2024-2030: Prices flirt with the marginal cost of supply
2030-2040: Reserve depletion takes precedence
PCI and semisoft prices temporarily reverse valuations
US prices will have a mixed relationship with the Australian LV price
Long-term demand trends
India
China's megatrend of declining steel, coke and coal demand still holds
Import demand into China supported by coastal shift of mills and emissions reduction drive
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