Global coking coal price forecast (April 2013)
Metal Expert Consulting continues to publish open quarterly reports to show its own understanding of the coking coal market development until 2015 and compare it with the consensus forecast of investment companies and analysts.
Like most types of raw materials and steel products, the global coking coal market saw a price decline in the past two months. After a short stabilization in February ($170-175/t FOB Australia, high-quality hard coking coal), spot prices went down to $165-170/t in March and $160-165/t in early April.
Demand for the material from China weakens: local companies cut their purchases back in the second half of Q1 and may suspend them in early Q2. This situation is due to increased stocks early this year, as well as due to a surplus in the Chinese steel product market (the country demonstrates peak steel production while real consumption rises slowly), which will lead to lower steelmaking and blast furnace capacity utilization in the country and lower coking coal consumption in March-April.
Taking into account the weakening of the Chinese market, the leading investment banks and industry analysts started to revise their short- and medium-term forecasts for coal (as well as for other raw materials and steel products) towards decline.
Several forecasts of coking coal price change prepared after the beginning of 2013 are provided below.
Global coking coal price forecasts by industry and financial analysts, $/t
Many of analysts will update their forecasts only by late April, but when preparing the consensus forecast we considered January forecasts of the investment companies who saw actual Q1 prices correspond to the levels they expected (discrepancy of no more than 2%).
Metal Expert Consulting’s methodology of forecasting global coking coal prices is based on mixed forecasting methods and includes non-linear dynamics models, demand and supply balance of the global coal market, estimate of the key suppliers’ costs. For more details on Metal Expert Consulting forecasting methods, as well as on investment forecasts for raw materials, see January report Global iron ore price forecast.
Application of Metal Expert Consulting forecast methodologies showed a good result in Q1. In particular, our forecast published in early 2013 differs from the actual $168/t by a mere $5/t, whereas investment companies showed a $3/t divergence from the fact. For reference, the consensus forecast of independent industry analysts published at the beginning of the year took into account only the latest January reports of investment banks.
Comparison of coking coal price forecast accuracy of MEC and industry analysts
The divergence between actual and forecast coking coal prices in January-March has resulted in update to Metal Expert Consulting forecast until the end of 2013 based on non-linear dynamics methods. In particular, we still think coking coal prices are below the reasonable level at the moment (over the past nine months, export prices for Australian coking coal have seen a much more significant drop than prices for other steel products, Chinese domestic coking coal prices, or global steam coal prices) and have major potential for the increase as demand recovers. According to Metal Expert Consulting estimates, the average price level will exceed $190/t in Q3.
The medium-term forecast of coking coal prices was also adjusted by up to $5/t: $190/t in 2014 and $185/t in 2015.
Nevertheless, the probability of a negative scenario in raw materials and steel products markets has been increasing in the last several months, according to the non-linear model dynamics. In particular, coking coal prices in this scenario decrease to $150-160/t in the next six months with further recovery to $170-175/t in Q4.
The diagram below presents comparison of Metal Expert Consulting forecast of export prices for Australian hard coking coal and price expectations of investment and industry analysts adjusted to this basis.
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