Investment group Wilson HTM recently held its FocusOnCoal conference attended by Centennial chief Bob Cameron, Excel managing director Tony Haggarty, Gloucester chief Gavin May and Barlow Jonker market analysis manager Andrew Fikkers.
The industry-wide view was coal prices will continue to strengthen, but at this stage JFY2005 (March 1 – April 30) price outcomes were expected to represent peaks to the current cycle.
However, Wilson HTM said there was an emerging view the future price of coking coal will be above the long term average of the past 10-20 years. A similar, though less strongly held view appeared to be emerging for thermal coal, although the relative global abundance of thermal coal versus coking coal, was expected to limit the potential.
In the short to medium term, Wilson HTM said there appeared to be widespread opinion metallurgical coal markets will remain tight, with low stock levels having not been replenished for a number of years, and Chinese demand expected to remain robust with significant ongoing growth.
“The global steel industry is expected to remain focused on the potential for shortfalls of coal supply and consequent steel production losses. In such a market, prices are expected to significantly reflect the customer’s ability to pay, and absorb or pass on the increased cost of coal,” Wilson HTM said.
World pig iron production was 648Mt in 2003 and is expected to rise to 823Mt by 2015. China will be the major growth driver, with 140Mt capacity to be added and India is expected to add 10Mt and have larger pig iron output than the USA by 2015.
For thermal coal, industry perceptions were wider. Wilson HTM said on one hand, infrastructure limitations were believed to be capable of maintaining a relatively tight demand/supply balance, despite significant potential supply side growth. On the other hand, Asian demand growth was considered by Barlow Jonker to be limited through to 2006.
However, Barlow Jonker said supply growth was achievable despite infrastructure constraints. Together these factors are expected to lead to an oversupply of thermal coal in the Pacific region in 2005, with downward pricing pressure in the Atlantic markets as surplus Pacific market coal is re-directed.
Wilson HTM, mainly sourcing Barlow Jonker, said supply in the Pacific in 2005 would grow to 50Mt by 2006 verses 30Mt historically. Trade from Pacific to Atlantic will increase in response to the oversupply in the Pacific. They said prices were likely to soften over 2005-06.
