Analysts revise down 2019 coal price outlook by 2%

13-November-2018

Pacific basin thermal coal prices next year will likely average nearly 2% less than forecast last month due to muted Chinese demand and excess supply, according to economic analysis firm FocusEconomics.

In a report released late on Tuesday, it estimated Asia-Pacific benchmark Newcastle (Australia) prices to average USD 92.50/t in 2019, down from the previous estimate of USD 94/t.

“Although prices for Australian thermal coal remain near multi-year high levels, they have fallen markedly in recent weeks on the back of a surplus of supply and muted Chinese demand,” it said, noting Australian exports rose “markedly” in October as the market recovered from strikes a year ago.

The Global Coal Newcastle index was assessed last at USD 103.15/t, down by 16% from July’s multi-year high of USD 122.89/t.

Chinese demand

“Chinese demand was muted [in October] as many firms reached the government-imposed import quotas for the year,” FocusEconomics said.

Investor concerns over slowing economic momentum in China, due to a trade spat with the US, will likely put further downward pressure on prices, according to the firm.

A gradual shift towards cleaner energy sources would also weigh on coal demand over the coming year, but a lack of investment in new mining facilities – as new coal plants come online in Asia and the Middle East – should provide some support to prices, it said.

As such, the Q1 2019 price forecast – which is based on an average of the projections of 10 economic forecasters – was revised up by nearly 5% to USD 104.50/t.

Source: MONTEL