Metallurgical coal markets are forecast to remain well supplied through 2016 and place further downward pressure on prices, according to a report by the Australian Government Department of Industry and Science.
Weaker growth in steel production in key producing regions, such as China and Japan, is likely to limit consumption growth. In addition, producers have been slow to respond to the falling price of metallurgical coal, principally due to cost-cutting measures and a depreciation of the currencies of major producing regions relative to the US dollar. For the full year 2016, metallurgical coal contract prices are forecast to decline by 16 percent and to average $86/mt.
According to the report, Australia’s exports of metallurgical coal are forecast to increase by 2.7 percent to 193 million mt in the financial year 2015-16. Export values are forecast to decrease by five percent to $21 billion in the given financial year, as the effect of lower prices offset the increase in export volumes and the assumed depreciation of the Australian dollar. Australia’s exports of metallurgical coal are expected to be supported by production expansions and the start of production at several mines.