Commodity Market Report
Global metallurgical coal short-term outlook August 2020: China’s continuation of import restrictions forces prices lower
Report summary
China effectively turned off the seaborne demand tap this month. Spot cargo sales to China dropped to a trickle as strictly enforced import rules weighed on markets for a second consecutive month. Demurrage costs and delivery concerns outweighed the huge notional arbitrage between domestic Chinese prices and seaborne coals. Unfortunately for coal exporters, improving ex-China demand was not enough to stop the rut. The firmness of China’s import rules led us to lower our price forecast for the remainder of 2020 . However, we still anticipate a strong price recovery by the end of Q4. But we acknowledge the pandemic and Chinese decisions on imports may negatively impact this outlook. Supply reductions failed to boost weak demand. As demand starts to rise, supply reductions begin to matter. With a possible La Niña weather event forecast for the Australia summer and the start of northern Hemisphere winter, there could yet be further supply surprises.
Table of contents
- Coronavirus update: Month ended August
- Chinese inflexibility on imports overshadows higher demand elsewhere
-
Base case: Better days ahead, eventually
- China economic performance and easing of import restrictions
- Ex-China continues resurgence led by India and Japan
- Global metallurgical supply dries up
- Timing of base case price increase
- Low case: China impasse and pandemic undermine recovery
- PCI teetering atop a price cliff
- Australia:Queensland’s metallurgical coal port throughput tumbles
- Australia: BHP to offload BMC to sweeten its thermal coal exit
- Australia: Peabody reduces labour and production in search for cost savings
- Australia: Glencore’s announced production cuts limited to thermal coal
- US: Supply looks poised for a trim
- US: Reporting season
- China: Accident at the Liangbaosi mine illustrates risk of high production rates
- China: Economy improving but it is not without risk
- China: Steel mills request higher coal import quotas as costs mount
- China: Higher iron ore prices eat into steel margins
- India: Crude steel production continues to recover
- Japan: Steel mills playing catch up on deferred Q2 tonnes, while steel demand from the auto sector improves
- Europe: Blast furnaces return, but will they ignite coal demand
- Europe: Unemployment dam ready to burst as furlough support ends soon
Tables and charts
This report includes 10 images and tables including:
- Infection rate versus hot metal production
- Cost versus spot price (US$)
- Queensland HCC benchmark price - base versus low case
- Key prices - history & quarterly forecasts (US$/t nominal)
- Queensland ports: Metallurgical coal exports (Mt per month)
- Europe’s export centric economy risks
- Global and Chinese crude steel production (Mt)
- Crude steel production – Ex-China producers (Mt)
- Global and Chinese blast furnace hot metal production (Mt)
- Blast furnace hot metal production – Ex-China producers (Mt)
What's included
This report contains:
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