The limited steel market will support low coal prices

Despite recent positive signs, coal prices are expected to remain low, given the weakness of the global steel industry, analysts say.

“Metallurgists will continue to struggle in 2021, especially in the highly sought-after Asia-Pacific coal market, as headwinds are holding back steel mills’ profitability despite some recovery in production,” Moodys Investor Services said in a September 29 report.

However, a lack of supply-side response could undermine higher coal prices expected in 2021, leaving the path to recovery uncertain.

In addition, consolidation in the steel market will make it difficult for US metal equipment manufacturers to operate, the Benchmark Company said in an October 1 report.

With only a handful of players left in the blast-furnace steel industry in North America, competition for domestic fixed-price businesses is likely to become even fiercer in the coming years, continued Benchmark.

The benchmark turned out to be optimistic about justified market expectations after a 26% rise in coal prices over the past month.

Platts Analytics was also bullish on coal prices achieved, noting industrial and steel output growth over the next year, which should continue to support satisfied demand and boost US exports in a report released Oct. 2.

Increases in restocking from India, Europe and Brazil, as well as the end of quotas for CY2020 in China and a wetter-than-normal monsoon in Australia include some of Benchmark’s upbeat factors.

“There is another potential, albeit less predictable, catalyst: the easing of Chinese import quotas at the start of Q4,” Benchmark said. “Why could this happen? Believe it or not, it is connected not so much with coal as with municipal coal. ”

With coal prices for China’s utilities hitting nearly two years, outside the government’s comfort zone, there are speculations that the Chinese government may become less restrictive on coal imports in October to ease price concerns.

“But the question is, will heap coal meet together with thermal coal or will it be considered separately? To be clear, we’re not sure if anything will happen at all, but it’s worth seeing, ”Benchmark said.

According to Benchmark, coal mining arbitration is driving imports to China at $ 32 per tonne.

As for US exports, before July, according to the latest available data, US census data on exports, meat exports amounted to 22.1 million tons, down 25.2% from the same period last year, while the total US heat exports were down 25.5% year on year.

According to Moody’s, US meat producers are losing their share of the export market, leaving prices low for exports in 2020-2021.

“At our expected commodity prices, we expect achieved coal export volumes to fall to 30-35 million ounces in 2020, down from 55 million ounces in 2019,” Moody’s said.

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