Global metallurgical coal short-term outlook March 2023

Australian PLV FOB shed 16% in the second half of March, washed out by fears around the global banking crisis and fading optimism around China’s re-opening. We have made a slight downward revision to our near-term view and expect prices to levitate at US$295-300/t in April-May 2023. Discount of semi-soft coking coal against the HCC Benchmark will narrow to 15% compared to 18% for H2 2022 term contract prices. Meanwhile, market sentiments continued to soften in China, clouded by negative steel mill margins, possible steel output cuts, and a rise in domestic mined metallurgical coal supply. China CFR prices will therefore lose steam and decline to US$307-315/t during Apr-May 2023. Stiff supply conditions in Australia will possibly improve in the second half of the year. After this, markets will transition towards a relatively balanced state, thereby driving a progressive decline in met coal prices to an average of US$255-260/t in H2 2023.