In its Commodities comment investment banker Macquarie described sentiment at the conference for steam coal pricing as bearish, but extremely bullish for hard coking coal pricing.
The gloom surrounding the steam coal outlook was attributed to a surge in Chinese exports. Gary Cochrane of Asia Pacific Coal Services estimated that Chinese coal export capacity had risen to 82 million tonnes this year compared with 58.7Mt in 2000 and was likely to reach 93.3Mt in 2002.
Enex Resources managing director Peter Coates said in response to weak thermal coal prices the company had postponed a 5Mtpa capacity increase planned for 2002 and was also cutting production at its existing mines by around 1Mt. (See related article).
Minec managing director Don Barnett said the expected Australian export production of hard coking coal in 2001 was 77Mt with Queensland accounting for 70Mt and NSW the rest. He said by 2005 it was forecast that export production could increase to 96Mt with 87Mt out of Queensland and 9Mt from NSW.
Between now and 2010 Barnett said new mines would contribute 13Mt of the increase in hard coking coal capacity and expansions will contribute 17Mt. However, 8Mt of capacity will be lost through mine exhaustion.
London-based commodities strategist Jim Lennon of Macquarie Bank said spot prices for coking coal remained well above the 2001 negotiated contract levels, particularly in Japan but also in Europe.
"The pressure on the Japanese to raise prices to at least match European levels has got to be intense," he said.
Lennon predicted a US$2 per tonne increase in the Japanese price for hard coking coal, a rollover in European prices, and semi-soft coals to suffer at least a US$1/t drop.
Lennon said Australia was forecast to supply 104Mt of the metallurgical total in 2001 and 106Mt in 2002. The country's market share had risen by 20 percentage points since 1990.
Macquarie reported that Japanese crude steel production dropped by 8.6% year-on-year in October, bringing the decline for the year-to-date to 1.9%. It said total Asian steel production was up by 2.2% y-o-y in October, due to continuing strong growth in China (estimated to be up by over 10% y-o-y). Production in the rest of Asia fell year-on-year for the first time since December 1999.
