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
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
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).
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