Customized Research and Market Forecasts

Global steam coal price forecast (August 2015)


Metal Expert Consulting continues publishing open quarterly reports to share its understanding of the steam coal market development in a medium- and long term and compare it with the consensus forecast of investment companies and analysts.

Over the past months, spot prices for steam coal have been moving both up and down. In May, the 6,600 kcal/kg material quotes increased to $60/t FOB Newcastle offsetting some of the April drop. In June, the prices dropped by 2% to stabilize at about $60/t in July.

While the actual price for steam coal was $59/t in Q2, the Metal Expert Consulting forecast issued in April was $57/t, its inaccuracy being 4%. Meanwhile, forecasts of most investment banks were quite accurate (with just a 1% error).

Comparison of steam coal price forecast accuracy of Metal Expert Consulting and industry analysts over the recent year

Q1 15

Q2 15

Q3 15

Q4 15

Actual price

67

59

-

-

Consensus forecast (investment banks) – July 14

80

81

82

83

Metal Expert Consulting – July 14

83

80

81

79

Consensus forecast (investment banks) – October 14

74

74

75

77

Metal Expert Consulting – October 14

69

71

73

73

Consensus forecast (investment banks) – January 15

67

68

68

70

Metal Expert Consulting – January 15

63

61

64

65

Consensus forecast (investment banks) – April 15

-

60

60

61

Metal Expert Consulting – April 15

-

57

65

61

The analysis of actual prices shows that the global prices for steam coal are again moving in line with the general trend I the raw material markets, for coking coal in particular, which facilitates forecasting in the segment.

However, the most recent forecasts of the investment banks (issued starting from July) differ substantially. The consensus forecast being the average of the forecasts of analysts from 15 companies says the steam coal price will stabilize at $63-64/t by the end of 2016. The most optimistic opinion (corresponding to the maximum or about maximum price forecast) is shared by Morgan Stanley, RBC Capital Markets and Investeс (up to $72-75/tin early 2016). The analysts of Credit Suisse, Citigroup Inc. and Liberum Capital are the most pessimistic, forecasting further decline of steam coal price (by another $5-10/t) with the following stabilization at low levels until 2017.

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

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

2015

2016

2017

2023

Consensus forecast

63

63

64

63

64

64

62

64

68

86

Maximum forecast

69

69

70

75

75

75

65

73

79

94

Minimum forecast

53

55

52

52

52

52

58

52

55

60

Note: To get the forecasts, all available prices have been adjusted to a common benchmark basis – the FOB Australia price for 6,000 kcal/kg steam coal.

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 estimate of key suppliers’ costs. For more details on Metal Expert Consulting’s forecasting methods, see the January reports Global Iron Ore Price Forecast and Global Coking Coal Price Forecast.

According to Metal Expert Consulting’s estimates, following the collapse over the preceding quarter ($59/t), the steam coal price is unlikely to be decreasing in the coming months. We believe the price will recover by $10/t till the end of 2016. In 2017, the steam coal price is expected to reach $73/t. At present, our forecast of global price trend is similar to the consensus forecast of investment banks and the industry experts.

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

Source: Metal Expert Consulting

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