Growing seaborne trade will pressure met coal prices, BREE says

Benchmark coking coal contract prices are forecast to average around $162 per tonne fob Australia for 2013 as a whole, while the average for 2014 is likely to be around $160 per tonne.

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“Forecast growth in seaborne trade in 2014 is the main driver behind continued lower metallurgical coal prices,” Australia’s Bureau of Resources and Energy Economics (BREE) said on Wednesday June 26.

The BHP Billiton Mitsubishi Alliance (BMA) settled the Q3 benchmark price at $145 per tonne fob Australia with Nippon Steel & Sumitomo Metal Corp, down from both $172 per tonne for the June quarter and $165 per tonne for the March quarter.

BREE is predicting an increase of 3% in world trade of metallurgical coal in 2013 to 281 million tonnes, and a further 7% growth in 2014 to 301 million tonnes on strong import growth in China.

China’s metallurgical coal imports are expected to increase by 16% to 61 million tonnes in 2013, BREE said.

“In 2014, China’s imports are forecast to increase by a further 21% to total 73 million tonnes as continued low seaborne prices encourage the consumption of imported coals over those produced domestically,” according to the BREE report.

India, on the other hand, is expected to return to trend import levels following a dip in 2012 at 16 million tonnes. The bureau expects import volumes to reach 22 million tonnes in 2013 and 23 million tonnes in 2014.

Imports into Japan are expected to increase marginally to 53 million tonnes and 54 million tonnes in 2013 and 2014 respectively, while South Korea is expected to see imports increase to 33 million tonnes and 34 million tonnes over the same period.

Imports into the European Union will return to 2011-levels of around 47 million tonnes by 2014 due to lower local production, according to BREE’s predictions.

On the exports front, Australia’s shipments of metallurgical coal are forecast to increase by 6% to 153 million tonnes in 2013, with another 10% growth to 168 million tonnes expected in 2014.

Higher levels of exports are likely to be supported by production from a number of mines that are scheduled to start up in 2013, such as Anglo American’s Grosvenor underground mine and BMA’s Daunia mine.