The Australian government's Department of Industry, Innovation and Science has cut its price forecast for hard coking coal in 2019 from $198/mt FOB to $186/mt FOB due to the more-than-expected slump in the September quarter. “Demand growth has been relatively muted against a background of a deteriorating global economic outlook and weak global steel production outside of China,” the department said in its quarterly report.
Moreover, the forecast for the fourth quarter and the coming two years has also been negative. Prices will stay under pressure for the rest of 2019 before a mild recovery in early 2020 as Chinese quotas for imported coal have already finished and as “India’s metallurgical coal imports are expected to have weakened in more recent months as monsoon rains dampen steel demand and output.”
Apart from the weakening of demand, the market has been hit by growing supply volumes, from Australia, Russia, Canada, Mozambique and Mongolia in particular. In total, these countries are expected to increase export coking coal shipments by 17 million mt in 2019, according to the department.
The export earnings forecast for the Australian coking coal industry in the 2019-20 financial year, which started on July 1, 2019, has been lowered by 5.7 percent or $2.3 billion to $37 billion.