Customized Research and Market Forecasts

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

Source

Forecast indicator

Revision date

2012

Q1

Q2

Q3

Q4

2013

2014

2015

Long-term forecast

2013

Goldman Sachs

Hard coking coal - Australia, FOB

Jan ‘13

191

n/a

n/a

n/a

n/a

178

195

205

n/a

ABN AMRO

Hard coking coal - Australia, FOB

Jan ‘13

190

166

n/a

n/a

n/a

173

165

160

n/a

Deutsche Bank

Contract Hard Coking Coal

Jan ‘13

210

165

175

190

180

178

185

180

n/a

ABARE

Hard coking coal - Australia, FOB

Mar ‘13

210

n/a

n/a

n/a

n/a

172

179

180

188

Renaissance Capital

Hard Coking Coal (contract)

Apr ‘13

210

165

172

175

175

172

178

183

170

Citigroup Inc.

Hard Coking Coal (benchmark Asia)

Feb ‘13

211

165

170

180

180

174

213

213

200

Macquarie Bank

Hard coking coal - Australia, FOB

Jan ‘13

210

165

165

185

185

185

206

215

155

Credit Suisse

Hard coking coal, contract prices, FOB Australia

Jan ‘13

210

165

170

175

175

171

183

190

170

CBA

Hard coking coal - Australia, FOB

Jan ‘13

209

n/a

n/a

n/a

n/a

165

183

195

172

Merill Lynch

Hard coking coal - Australia, FOB

Jan ‘13

193

175

180

185

190

183

190

n/a

n/a

ANZ

Coking coal - Hard

Jan ‘13

190

155

165

175

185

170

175

170

n/a

Consensus forecast

Hard coking coal (FOB Australia)

202

167

172

182

181

175

187

190

173

Forecast (max)

Hard coking coal (FOB Australia)

202

167

180

190

190

185

213

215

200

Forecast (min)

Hard coking coal (FOB Australia)

202

167

165

175

175

165

165

160

155

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

Q1 ‘13

Q2 ‘13

Q3 ‘13

Q4 ‘13

Fact

168

-

-

-

Consensus forecast (investment banks) – Jan ‘13

165

170

180

183

Metal Expert Consulting – Jan ‘13

173

195

206

205

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.

Source: Metal Expert Consulting

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