India’s met coal imports on track to surpass those of China, Japan
Australia’s Department of Industry & Science expects India to become the biggest importer of metallurgical coal in 2015, overtaking China and Japan.
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According to its latest forecast in its quarterly report, India’s imports are set to grow 13% to 52 million tonnes this year, compared with China’s 45 million tonnes and Japan’s 48 million tonnes.
This is in line with forecasts made by analysts at investment banks CLSA and Macquarie.
India’s rapid growth in demand for met coal is receiving a boost from the government’s call to invest heavily in infrastructure, the Australian report said.
The department’s latest 2015 forecast for China’s met coal imports is down by more than a third from the its projection of 69 million tonnes in its last quarterly report. This reduction was attributed to a projected contraction in steel production and self-sufficient supply from domestic miners in China.
However, Australian coking coal is expected to have a competitive edge over materials from other major producing countries due to a free-trade agreement signed by Canberra and Beijing recently, it said.
The Australian department also revised its outlook for the metallurgical coal market, saying it would remain oversupplied until announced production cuts materialise and demand growth picks up.
It previously forecast the supply-demand balance in the met coal market to tighten from 2016 onwards as high-cost production capacity gets shut down while steelmaking activity in China and India picks up.
Contract prices are expected to remain weak over the remainder of 2015, due to a continued surplus of met coal and depressed steel prices, the department noted.
It expects contract prices for premium hard coking coal to average $104 per tonne fob Australia in 2015, down from its previous estimate of $115 per tonne fob.
Australian coal producers and Nippon Steel & Sumitomo Metals Corp agreed on a benchmark price of $93 per tonne fob for the third quarter, which is lower than the $109.50 per tonne fob agreed for the second quarter.
On the supply side, 60% of US capacity is at risk of closure due to a strong US dollar coupled with weak met coal prices, according to the report.
The department expects Australia’s met coal production to increase by 4.3% to 188 million tonnes this year, slightly lower than its projection of 190 million tonnes in last quarterly report.
Australian producers have been affected by lower prices, and several miners – including Glencore and Peabody Energy – have called for output cuts in 2015. However, such cuts may not be enough to offset additional tonnage from newly launched projects such as Whitehaven Coal’s Maules Creek, the department said.