Steel Industry Insight

Fitch expects iron ore and coking coal prices to moderate in 2018

International credit ratings agency Fitch Ratings has stated in its 2018 Global Mining Outlook report that it expects market prices for iron ore to decline below $60/mt during 2018 from an average of around $75/mt in 2017. This outlook reflects Fitch’s expectation of flat demand in China combined with around 50 million mt of new capacity entering the market. The main sources of new supply are the ramp-up of the Roy Hill and Silvergrass mines in Australia and Brazilian miner Vale’s S11D mine. Fitch continues to expect that the major producers will be disciplined in bringing new supply into the market in order to try and balance demand, support prices and maximize profits.

Regarding metallurgical coal, Fitch stated that it expects metallurgical coal prices to continue to moderate in the current year based on additional supply to the market. Factors behind this include the continued impact from the relaxation of China’s 276-day rule, the recovery from Cyclone Debbie in Australia, and additional supply from other producers.

According to the credit ratings agency, metallurgical coal demand in the current year will be influenced by environmentally-led winter production cuts to Chinese steel production from November 2017 through to March 2018, and slower steel demand from the property sector. This is expected to result in Chinese metallurgical coal imports reverting to 2016 levels in 2018. Fitch also expects metallurgical coal imports in India, Japan and South Korea to grow in the low to mid-single digits in this year, absorbing increased Australian production and resulting in displacement of US production. Fitch’s price assumption for hard coking coal in 2018 is $135/mt, compared to an average of around $175/mt in 2017.


*This was published on SteelOrbis website on January 31, 2018.

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