Met coal price recovery unlikely until 2016 – Moody’s
A recovery in metallurgical coal prices to between $135 and $145 per metric tonne is unlikely before the second half of 2016, Moody’s Investors Service said last week.
In its sector commentary, ‘Slow China demand, few curtailments push out met coal recovery’, pub- lished last week, the firm said that while it maintained its expectation that production cuts would ultimately bring benchmark prices closer to the 135/mt to $145/mt marginal cost of prodution, it now believed that it would take longer than previously forecast.
Moody’s said that while the fourth-quarter benchmark price for high-quality coking coal settled at $119/mt, essentially identical to the second and third quarters, spot prices for high-quality metallurgical coal showed no upward momentum.
Exacerbating the trend were a muted supplier response, slowing demand from China and a weak global economy, which made any material price recovery unlikely over the next 18 months.
Moody’s said that, despite production cuts being expected to ultimately help coal prices recover to their marginal levels, the protracted price weakness would continue to stress metallurgical coal producers such as Arch Coal, Alpha Natural Resources and Walter Energy.
\“Weak demand from China, which consumes close to 60% of the world’s coal, will push out the recov- ery,” Moody’s VP and senior analyst Anna Zubets-Anderson said.
China also produced more than half of the world’s metallur- gical coal. “We are seeing slowing imports into China and believe that the Chinese steelmakers rely more heavily on domestic met coal sup-plies and attempt to manage with lower inventory levels,” Zubets-Anderson added.
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