Customized Research and Market Forecasts

Global coking coal price forecast (December 2013)


Metal Expert Consulting continues to publish open quarterly reports to show its own understanding of the coking coal market development until 2015 and in a long term and compare it with the consensus forecast of investment companies and analysts.

Though Q4 contracts between Australian suppliers and Japanese consumers of hard cocking coal had been signed at $152/t FOB Australia, actual spot prices were decreasing from $148/t in October to $137/t in December due to still weak demand from key consumers (China, Japan) and thick stocks.

According to available information, Anglo American has settled Q1 2014 prices with Asian steelmakers at $143/t FOB Australia. Meanwhile, the benchmark-setting negotiations between BHP Billiton-Mitsubishi Alliance and Nippon Steel and Sumitomo Metal are still underway.

Seeing the above price fluctuations, the leading investment banks and industry analysts keep revising their short- and medium-term price forecasts for coking coal (as well as other raw materials).

Below is the Metal Expert Consulting’s forecast of coking coal price changes in the short- and medium-term based on 27 reports sourced from industry and investment analysts. To build our forecasts, we have adjusted all available prices to a common benchmark basis – the FOB Australia price for hard coking coal. Only the most recent forecasts (for November-December) have been considered as well as some earlier forecasts of investment banks provided their turned out to be very accurate in Q3-Q4.

ABARE, ABN AMRO, ANZ, BREE, CIMB Group, Citigroup Inc., Commonwealth Bank, Credit Suisse, Deloitte Access Economics, Deutsche Bank, Goldman Sachs, Investec, KPMG, Liberium Capital, Macquarie Bank, Merill Lynch, National Australia Bank, Numis, RBC Capital Markets, Renaissance Capital, Scotiabank, Standart Bank, UBS, VTB Capital, Westpac, Wilson HTM.

Experts’ forecasts from the reports and research works carried out by the following companies have been taken into account (in alphabetic order): ABARE, ABN AMRO, ANZ, BREE, CIMB Group, Citigroup Inc., Commonwealth Bank, Credit Suisse, Deloitte Access Economics, Deutsche Bank, Goldman Sachs, Investec, KPMG, Liberium Capital, Macquarie Bank, Merill Lynch, National Australia Bank, Numis, RBC Capital Markets, Renaissance Capital, Scotiabank, Standart Bank, UBS, VTB Capital, Westpac, Wilson HTM.

16 of the above companies provide long-term forecasts about coking coal prices, therefore the sources used for consensus forecast, the maximum and minimum forecasts for medium- and long-term outlook are different.

The minimum coal price forecast is again offered by Numis and ABN AMRO expecting further decrease amid oversupply. The most optimistic forecasts are made Citigroup Inc., CIMB Group, and Wilson HTM, who believe that current prices are as low as possible and will recover thanks to expected improvements in markets for raw materials and steel.

Global coking coal forecasts by industry and financial companies, $/t

Q4 ‘13

Q1 ‘14

Q2 ‘14

Q3 ‘14

Q4 ‘14

2013

2014

2015

Long-term

Consensus forecast

143

154

157

160

160

150

158

168

175

Maximum forecast

165

170

180

185

175

198

200

Minimum forecast

142

145

150

131

135

130

130

Note: To get the forecasts, all available prices have been adjusted to a common benchmark basis – the FOB Australia price for hard coking coal.

Metal Expert Consulting’s methodology of forecasting global coking coal prices is based on mixed forecasting methods and includes models of non-linear dynamics, demand and supply balance in the global coal market, estimates of key suppliers’ costs. For more details on Metal Expert Consulting’s forecasting methods, as well as on investment forecasts for raw materials, see January report Global iron ore price forecast.

Comparison of actual coal prices in the global market in Q4 with those forecast by Metal Expert Consulting in its October report shows that we had overestimated the probability of spot prices reaching the level of contract prices. The inaccuracy of our forecast was about $10/t. Meanwhile, the investment companies’ forecast is $10/t different from the fact.

Comparison of coking coal price forecast accuracy of MEC and industry analysts

Q1 ‘13

Q2 ‘13

Q3 ‘13

Q4 ‘13

Q1 ‘14

Fact

168

151

141

143

-

Consensus forecast (investment banks) – Jan ‘13

165

170

180

183

-

Metal Expert Consulting – Jan ‘13

173

195

206

205

-

Consensus forecast (investment banks) – Apr ‘13

168

172

182

181

-

Metal Expert Consulting – Apr ‘13 (basic scenario)

-

185

193

185

-

Metal Expert Consulting – Apr ‘13 (alternative scenario)

-

150

160

172

-

Consensus forecast (investment banks) – Jul‘13

-

151

164

167

175

Metal Expert Consulting – Jul ‘13 (basic scenario)

-

-

150

170

166

Metal Expert Consulting – Jul ‘13 (alternative scenario)

-

-

140

135

144

Consensus forecast (investment banks) – Oct ‘13

-

-

141

150

161

Metal Expert Consulting – Oct ‘13

-

-

-

153

155

The graph below shows comparison of Metal Expert Consulting’s export price forecast for Australian hard coking coal with the level of prices that investment and industry analysts expect (adjusted to the same basis).

Compared with the October report, we have adjusted expectations as to global prices for coking coal downwards (due to actual decrease in quotes). According to Metal Expert Consulting’s forecast, price for Australian material will decline to $140/t over the next three months to recover slowly afterwards until the end of 2014 (up to $155/t FOB in Q4). Moreover, we are positive that in 2014 coal prices will reach their minimum just to continue rising in 2015. The 2015 and long-term price forecast has stayed at the previous level.

Source: Metal Expert Consulting

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