The bank noted in its latest Minerals Energy Outlook that thermal coal spot prices have eased in recent months after about six months of relatively stability, with the active Newcastle contract on the Intercontinental Exchange drifting from the high $US50s in early September to the low $50s in November.
NAB attributed the decline of China’s coal production – both thermal and metallurgical –this year to weakness in steel production and thermal electricity generation.
Over the first 10 months, China produced 3.05 billion tonnes of coal, down 3.6% year-on-year. For the full year, the China National Coal Association forecasts a 5% fall.
“In the short term, there is little to suggest a major improvement in seaborne demand for thermal coal,” NAB said.
“China’s imports have fallen in 2015 – down around 32% yoy over the first ten months of the year – and weakness in the industrial sector and efforts to address pollution concerns are unlikely to support significant growth next year.
“In Japan, the energy sector is adjusting to the restart of nuclear generation (albeit the government’s target for nuclear appears unrealistically high).
“India’s imports have declined in recent months as domestic output has increased, in line with the government’s goal to end coal imports in the next two to three years.”
Combined, these three economies accounted for about half of global imports in 2014.
Lower coal prices since the start of 2013 have driven production cuts, as higher-cost producers have been forced from the market.
Indonesian Coal Mining Association data has revealed that next year its exports will fall below 300 million tonnes, from 330Mt to 360Mt this year.
Australian exports grew by just 1.7% yoy over the first 10 months of 2015 compared with 6.7% growth in 2014, and NAB says the prospects for growth in Australian exports in 2016 “are limited at best”.
“In the short term, spot prices could recover slightly on restocking ahead of the northern winter, however any recovery is likely to be modest,” NAB said.
“Our forecast for the 2016 Japanese financial year remains unchanged at $62/t, from $67.80 this year.
