Met coal forecasts

LOOKING into the crystal ball, Macquarie analysts have forecast annual metallurgical coal demand from around the globe up to 2015.
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At the Baal Bone Colliery. Courtesy Xstrata Coal.

Blair Price

China’s unprecedented demand for the commodity this year has Macquarie noting the country is the second-largest importer of coking coal after Japan.

While cheaper coal prices, lower freight costs, and safety-related shutdowns in the small mines sector have all played a role, Macquarie expects China to produce 550 million tonnes of pig iron this year, 17% up from 470Mt realised in 2008.

But Macquarie does not expect the same annual growth of 80Mt for pig iron production in 2010, forecasting it will instead grow by 24Mt and at an average of 38Mt each year between 2010 and 2015.

Given the 24Mt forecast for pig iron production growth, Macquarie expects China to import 20Mt of seaborne metallurgical coal in 2010, down from around 29Mt expected in 2009.

Macquarie stressed there were risks to forecasting China’s import picture for the commodity, given the nation’s history of being self-sufficient in metallurgical coal.

Factoring in returning domestic production as small mines in China are reactivated in 2010-12, Macquarie has forecast the growing world power to import 26Mt of metallurgical coal in 2011, 29Mt in 2012, 33Mt in 2013, 38Mt in 2014, and 36Mt in 2015.

“Although we project somewhat weaker Chinese imports for the rest of this year and into 2010, we expect China to remain a significant presence in the seaborne market and expect that market to remain tight as a result,” Macquarie said in a commodities report.

For the rest of Asia, excluding China, Macquarie expects metallurgical coal demand to reach a total of 103Mt this year, 119Mt in 2010, 127Mt in 2011, 134Mt in 2012 139Mt in 2013, 146Mt in 2014, and 156Mt in 2015.

European demand was forecast to be a historically low 49Mt this year, 59Mt in 2010, 64Mt in 2011, 68Mt in 2012, 70Mt in 2013 and 2014, and 71Mt in 2015.

The analysts expect most of the supply to come from Australia.

While Australia’s supply is expected to fall by around 3Mt this year from 2008, the analysts forecast an 8% jump in exports of 143Mt in 2010.

Another 8.5% increase to 155Mt is forecast for 2011, while Macquarie expects growth to average 6.5% for the next four years reaching 200Mt of Australian metallurgical coal exports in 2015.

US exports have been tipped to be 28Mt this year, 7% down from 2008.

But the investment bank forecasts 30Mt for 2010 and a steady level of 31Mt of American metallurgical coal exports each year up to 2015.

The analysts also expect Canada to eclipse American exports in 2014 with their forecast of 35Mt and 39Mt in 2015.

“Based on our Chinese demand profile, market balance requires Australia to grow by 10 million tonnes per annum or more and for the US to maintain exports of around 30 million tonnes per annum,” Macquarie said.

“These are both bullish medium-term factors, given Australia’s inability to deliver this kind of growth historically and given high and increasing costs in the United States.

“The internationally traded metallurgical coal market looks tightly balanced to 2012, if China continues to import at more than 20 million tonnes per annum.”

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