Over 50m tonnes of met coal supply cuts needed, Macquarie says

Over 50 million tonnes worth of supply cuts are needed to bring balance to the metallurgical coal market, which has been oversupplied since late 2011, investment bank Macquarie said.

Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.

“On a freight- and quality-adjusted basis, around 20 million tonnes of US supply looks to be loss-making in a delivered Asia basis. With major Australian suppliers set to keep contract pricing around current levels, the main hope these producers have is that Chinese domestic supply cuts first,” Macquarie said in a research note seen by Steel First on Friday July 26.

“Either way, we would expect to see further supply reductions in both areas over the coming months,” the note read.

The bank said Australian exports have recovered from the Queensland floods of 2011, moving back above the 160 million tpy level seen in 2010 and 40 million tpy higher than that seen in the first half of 2011.

At the same time, US exports have maintained a level that is about 15-20 million tonnes higher than that seen in 2010.

“It is not new seaborne supply that is the problem in met coal. Rather, it is the return of existing supply,” Macquarie said.

On the demand front, global blast furnace output has been strong with Chinese output running up 6.8% year-on-year in the first half of 2013. Ex-China output, on the other hand, is down 1.1%.

“Even the push in blast furnace output this year has not satiated the available supply capacity,” the note read.

The third-quarter coking coal benchmark was settled at $145 per tonne fob Australia last month, down from the $172 per tonne fob agreed upon for the June quarter.

On the spot market, Metal Bulletin’s Coking Coal Index for low-vol material stood at $141.58 per tonne cfr Jingtang on July 19, compared with a high of $185.70 per tonne recorded on February 22.

What to read next
Market participants are cautiously optimistic about a rebound in iron ore concentrate premiums, with steelmakers around the world set to ramp-up production in line with an anticipated increase in demand for steel products, Fastmarkets understands
General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world
Electrolysis processes developed by Boston Metal and Electra that eliminate the need for coal in steel production could be key to a net-zero emissions future for the metallics industry, attendees learned at Fastmarkets’ conference on January 17-19 in Dallas
Low supply, strong demand to spur scrap prices higher in Feb, market says
US deep-sea ferrous export prices from the East Coast to Turkey have plateaued, with a Turkish mill purchasing a cargo at prices stable from the last-reported sale
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.