Global metallurgical coal: things to look for in 2019 Report

Insight 18 January 2019

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Report summary

A soft start to the year for metallurgical coal prices, and also for economic data, is threatening a dose of reality for international coal suppliers to follow two years of supernatural margins. Lower steel prices and margins in 2019 should take some of the heat out of prices, particularly for premium hard coking coals, that have enjoyed the benefits of unique steel sector conditions since 2017. But we have been here before. Chinese stimulus should create a soft landing for steel demand, and we expect Chinese government intervention in the coke and coal sectors to keep both markets tight during the year. Elsewhere supply will improve, but the solution to Australia's export disruption will not be completely solved this year. We expect lower average metallurgical prices in 2019, but margins for suppliers will remain well above historical norms.

Executive Summary
- Economic risks rising inside and outside China
- China's market interventions will keep the market guessing
- Coke sector reform could see prices buck a softening trend
- Chinese coking coal supply a hostage to safety checks in 2019
- Import caps and production controls will remain part of the Chinese coal landscape
- Maintaining India's growth rate is probably too much to ask
- Weaker currencies and lower oil prices helping to push coal supply costs down
- Plenty of supply growth options in 2019 but disruption still a thorn in industry's side
- Emerging themes
- Pressure to grow on steel sector emissions
- Shackles loosening on development capex