This should cap seaborne thermal coal price unless China’s coal demand growth recovers to 5%, from 2.6% in 2012, it said.
The Macquarie commodities team downgraded its 2013-15 seaborne thermal coal price forecasts by 5-12%, largely driven by a continuation of oversupply seen in 2012 and muted import demand growth from China in the medium term.
Macquarie is forecasting a 2013 financial year earnings contract price of $US92 per tonne (from $104/t) and FY13E Newcastle spot price of $90/t (from $100/t).
It also lowered China’s 2013-14 coal price forecasts by 9% and cut the 2013-14 spot coal price forecasts by 9% to 640 renminbi per tonne (from RMB700/t).
“This is to reflect lower-than-expected coal demand from power generation, a balanced buyers’ market in 2013 and an expected supply surplus from 2014-15, attributable to the economic slowdown, Beijing’s policy to reduce energy and CO2 intensity by 16-17% during 2011-15 and the shift in power generation to non-coal alternatives and, in longer term, the increasing railway capacity from 2015,” Macquarie said.
“Meanwhile, the persistent high coal inventory (20 days versus the normal requirement of 14 days) and the influx of cheap seaborne coal, given the shale gas boom in the US and oversupply in the region, do not provide a positive backdrop.”
China may turn to supply surplus in 2014, further suppressing import demand/pricing for seaborne thermal coal in the medium term.
Coal imported into China rose 29% in 2012 to 236 million tonnes, mainly due to the sharp fall in the seaborne price, thus making imported coal more price-competitive and making coastal coal users in China increase imports.
“However, we expect Chinese imports to fall from 2013, with the price arbitrage reversed from September 2012 and supply discipline increasing in Indonesia and Australia,” Macquarie said.
“This could be bad news for the seaborne coal price.
“In 2014, we may see China turn to a local supply surplus, further suppressing import demand/pricing for seaborne thermal coal medium term.”