In its latest bulk commodities update, National Australia Bank tracked China’s economy as reaching its slowest growth rate since March 2009 in the third quarter this year.
Weaker construction activity was cited as a key contributor to slower growth in steel consumption and metallurgical coal use, while efforts to curb air pollution were tipped to result in some restriction on thermal coal imports.
A seasonal demand spike with the onset of the northern winter – along with the impact of China’s new import tariff – could result in some price increase for thermal coal in the short-term.
However, NAB called for contract prices to remain at $US80 per tonne for 2015 after scraping their lowest spot price in more than five years in October at under $65/t.
“It is likely that there is some seasonal component in this trend – given the lull in demand post the northern summer and ahead of winter purchases,” the bank said.
“That said, recent trends continue to signal a market that is well supplied. Stockpiles at China’s major coal ports remain adequate – around typical levels at Qinhuangdao and above the range for Guangahou.
“Stocks tend to rise in November ahead of peak winter demand.”
Weak prices in metallurgical coal, meanwhile, are expected to delay a range of new developments in Australia.
While met coal spot prices have traded in a tight range in recent weeks, cost analysis by Wood Mackenzie has been flagged as suggesting that over half of global output is unprofitable at current prices.
This includes China, where local data has estimated about 70% of coal miners recorded a loss this year.
“The poor profitability conditions for metallurgical coal producers and a recovery in Chinese import purchases should allow prices to trend back from current lows,” NAB said.
“We continue to expect prices to trend back towards $150/t for hard coking coal by the end of 2015.”
China, which accounts for about 25% of global coal imports, saw a 19% year-on-year fall in met coal imports for the first nine months of 2014 and an 18% year-on-year fall in thermal coal imports over the same period.
Over this nine-month period, Australian met coal exports increased 11% while thermal coal exports rose 7.6%.