Customized Research and Market Forecasts

Global steam coal price forecast (October 2013)


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

Like coking coal, steam coal was steadily decreasing in price in world markets starting from February. September was the only month for price to stay stable, about $78/t (Australian 6,600 kcal/kg coal, FOB Newcastle).

Metal Expert Consulting’s methodology of forecasting global steam coal prices is based on mixed forecasting methods and includes models of non-linear dynamics, demand and supply balance in the global coal market, and estimation 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.

See below for the consensus forecast of steam coal price changes in the short- and medium-term outlooks that Metal Expert Consulting has made based on 29 reports by industry and investment analysts. To get the forecasts, we have adjusted all the available prices to a common benchmark basis – the FOB Australia price for 6,600 kcal/kg steam coal. The forecasts for August-September have been used. As an exception, we have also considered some forecasts produced by investment banks for earlier periods (the reason is their high degree of accuracy, as the results of Q2-Q3 show).

Experts’ forecasts from the reports and researches carried out by the following companies have been taken into account (in alphabetic order): ABARE, ANZ, BREE, CIMB Group, Citigroup Inc., Commonwealth Bank, Credit Suisse, Deutsche Bank, Econ Intelligence Unit, Euromonitor International, Goldman Sachs, IMF, Investeс, Liberium Capital, Macquarie Bank, Merill Lynch, National Australia Bank, Numis, RBC Capital Markets, Renaissance Capital, Societe Generale, Standart Bank, TD Economics, UBS, VTB Capital, Westpac, Wilson HTM, World Bank. We have added 2 companies to the range to prepare our consensus forecast (as compared with the April report).

About one third of the above mentioned companies provide no long-term forecasts on steam coal prices, therefore the consensus forecast, the maximum and minimum forecasts for the period have been prepared based on 20 indicators. The minimum coal price forecast is offered by Numis, the maximum one – by CIMB Group and VTB Capital.

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

Q3 ‘13

Q4 ‘13

Q1 ‘14

Q2 ‘14

Q3 ‘14

Q4 ‘14

2012

2013

2014

2015

Long-term

Consensus forecast

78

88

90

90

90

92

96

89

90

95

99

Maximum forecast

95

99

98

100

105

95

100

110

113

Minimum forecast

75

75

70

71

71

75

72

69

78

Note. To get the forecasts, we have adjusted all the available prices to a common benchmark basis – the FOB Australia price for steam coal.

The use of our own forecasting methods showed good results in Q3. In our July report we stressed the model proved largely unstable due to high volatility of actual steam coal prices in the previous months, and so two price development scenarios were suggested: a basic one saying prices would stay high ($100/t) until the end of the year and an alternative one illustrating a coal price decrease to $82-83/t in Q3-Q4.

Comparison of actual steam coal prices in the global market in Q3 ($78/t) with those predicted by Metal Expert Consulting in its July report shows the probability of the basic scenario has been overestimated, whereas the alternative forecast is $5/t different from the fact which is less than the error of investment banks’ forecast that makes $12/t or 15%.

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

Q1 ‘13

Q2 ‘13

Q3 ‘13

Q4 ‘13

Fact

94

87

78

-

Consensus forecast (investment banks) – Jan ‘13

94

94

98

99

Metal Expert Consulting – Jan ‘13

96

107

102

101

Consensus forecast (investment banks) – Apr ‘13

93

97

98

Metal Expert Consulting – Apr ‘13 (basic scenario)

100

100

97

Metal Expert Consulting – Apr ‘13 (alternative scenario)

89

90

93

Consensus forecast (investment banks) – Jul ‘13

90

93

Metal Expert Consulting – Jul ‘13 (basic scenario)

86

93

Metal Expert Consulting – Jul ‘13 (alternative scenario)

83

82

Like in the coking coal and iron ore market reports we will consider only one scenario of developments in the world steam coal market, as we believe that probability of other scenarios to unfold is much lower. The current coal price dynamics will most probably develop in the same way as in 2012-2013. During the next 6 months price for Australian steam coal will rise to $84/t. In April-June 2014 it will go down to $80/t and recover upwards to $85/t in Q3-Q4. The steam coal price forecast for 2015 and long terms has stayed at the previous level.

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

Source: Metal Expert Consulting

© 2004-2017 Metal Expert LLC, all rights reserved Back to top