A more bearish outlook for premium low-vol coking coal is to be expected with price projections revised downward by 10% to $213/mt FOB Australia for 2013 and 5% to $205/mt FOB for 2014 due to supply growing faster than demand, a Commonwealth Bank research report said.
Previous forecasts for the next two years had been at $237/mt FOB and $216/mt FOB.
This compares with current spot prices of $222.50/mt FOB, according to Platts data.
Demand will fall in the next two years, with global steel mills growing at a "more moderate pace than we had expected," the report said.
The exceptions were China and India which would continue to support global coking coal demand due to limited domestic availability, the report said.
China's steel industry, in particular, was "more resilient than rest of the world" with output at the end of 2012 expected to be "some 2-4% higher than in 2011," based on forecasts by Commonwealth Bank.
The bank's lower price expectations were based on coking coal supply, which was "growing faster than demand," the report said. In particular, this medium- term supply growth "should be dominated by Australia, Mongolia, Mozambique and China's Shanxi province."
Lachlan Shaw, the author of the report, told Platts Thursday that his forecast for the price in the fourth quarter was that it might be around $215-220/mt FOB Australia. Much hinged on the BMA strike situation, Shaw said, "the big watch point for coking coal is supply."
Demand for coking coal could be a touch stronger in Q4 should the eurozone not implode and the Chinese continue their "pro-growth policy stance," Shaw added.
Source: Platts