Chinese imports of coking coal are forecast to decline to just 30 million tpy by 2020 from 60-70 million tpy now, according to equity broker CLSA. This is due to the broker’s expectation that the country’s steel consumption will peak before the end of this decade as urbanisation slows, and infrastructure and construction demand start to decline. In addition, ex-China demand will draw supply away from the world’s second-largest economy, CLSA said in a recent research note.
China is the largest importer of seaborne coking coal and has been the clearing market as its steel production grows. During the first nine months of this year, the country imported 44.34 million tonnes of coking coal, according to Chinese customs.
In 2013 as a whole, China imported 75.39 million tonnes of the steelmaking raw material.
But CLSA argues that “in some respects the country can be viewed as a net exporter given the volume of coking coal exported in the form of coke and steel”.
China exported a total of 73.89 million tonnes of finished steel during January-October, up 42% year-on-year, while its coke exports amounted to 6.56 million tonnes during the first ten months of this year, more than double the volume seen in the corresponding period last year.
CLSA forecast the quarterly benchmark for hard coking coal to stand at $115 per tonne fob Australia for the first quarter of next year and $120 per tonne for the second quarter next year. These are down from its previous forecast of $130 per tonne.
“However, we do believe prices will not worsen from here, as there has been a significant destocking in north Asian markets in 2014, and supply discipline is beginning to take effect with many mine closures announced this year, the benefits of which should be felt by the market in 2015,” CLSA said.
It forecast the hard coking coal quarterly benchmark to average at $123 per tonne fob Australia next year, $138 per tonne in 2016 and $148 per tonne if 2017.
“As supply cuts are finally being seen, the market should gradually be able to move away from relying on Chinese marginal buying,” CLSA said.
India is expected to be the top importer of coking coal by 2018, the broker said. However, it will take time for the country to drive a strong recovery in prices as it “first needs to absorb the surplus of seaborne coal which is currently sold into China”.
CLSA forecast India’s share of global imports of coking coal to rise to 24% by 2020 from 14% this year.(By SteelFirst)