Production cutbacks in the US have, however, impacted the balance of global trade.
While Australian exports grew strongly last year, exports from the US fell by 5.8% year-on-year and Canada by 9.7% yoy in the first nine months of the year.
NAB said this morning a key contributor to the softening in prices has been the weak import conditions in China, which imported a total of 62 million tonnes last year, a yoy decline of 17%.
“While the availability of domestic metallurgical coal has improved – due to large scale rail infrastructure projects – domestic producers have struggled for profitability as well,” NAB said in its latest Bulk Commodities Update issued today.
Prices for metallurgical coal have remained comparatively stable since March 2014 – trading in a range of around $US5/tonne. In early February, the spot price was around $113/t for Queensland hard coking coal.
Contract prices for the first quarter of 2014 edged marginally lower – down to $117/t compared with $119/t for Q4 2014.
NAB said that across the second half of the year, contract prices have held up at comparatively high levels compared with the indicative level suggested by the lower spot price, with consumers likely paying a slight premium to ensure supply.
“The ongoing stability in metallurgical coal prices is evidence of a well-balanced market,” NAB said.
“In response to falling prices across the first half of the year, higher cost producers – the bulk in North America – implemented production cuts.”
Bloomberg Intelligence estimates that around 20 million tonnes of annual capacity was removed from the market from the start of the second quarter.
In a sense, nothing much has changed in that China remains the dominant market for bulk commodities – accounting for around two-thirds of iron ore trade, and around a quarter of thermal and metallurgical coal trade in 2013.
Last year, China’s official data showed economic growth of 7.4%, the slowest annual rate since 1990.
From a bulk commodity perspective, slowing levels of fixed asset investment across the year impacted demand for steel and energy, NAB said.
“We expect China’s economic growth will ease further – given China’s focus on reform – to 7.1% in 2015 and further to 6.9% in 2016,” NAB said.
