30/10/2014 – No major price jumps in metallurgical coal expected until 2018: WoodMac analyst

The global metallurgical coal market will take a few years to recover, Matthew Warder, senior analyst for steel and iron ore costs, at Wood Mackenzie, said Monday, adding: “The next inflection point for significant price improvement [in met coal] will take place in 2018, caused by demand improvement and reserve depletion at some key Australian mines.”He was speaking at the Met Coke 2014 World Summit in Chicago. Despite the current weakness in met coal demand and pricing, Warder said that WoodMac expected “significant demand growth to 2035,” to the order of 100 million mt — but over the next 20 years. Asia accounts for most of that, and India’s growth will be a major factor, he added.Right now, however, more than one-third of the seaborne met coal cost curve “has a negative margin at a price of $119/mt,” he said. He emphasized that in the near term, there was still an oversupply of hard coking coal. The need for projects would not begin until 2018, however, “some of which could be filled by returning mines,” he added.Committing to new projects would be more difficult, Warder conceded, adding: “Prices will need to increase significantly to incentivize further met coal investment — particularly for Australian hard coking coal projects.”

Talking about growth drivers, Warder said that WoodMac’s longer-term view was that China’s steel demand would peak in 2028 at a per capita consumption of about 600 kg — up from around 500 kg in 2013. Steel production in China was expected to peak a year later, in 2029, and steel exports would remain in excess of 60 million mt/year for the long term, he added.Overall, global crude steel output would be “slower, not lower,” Warder said, pointing to the annual growth of 1.4% for crude steel demand through 2035, but just 0.9% for hot metal, or blast furnace, output.China has been the dominant force in global hot metal production, “but in our non-base-case view, things will change after 2025 as India enters liftoff mode,” Warder said.

Source – Platts.com