mines prices markets

outlook for premium low-vol coking coal is to be expected with price projections revised downward by 10% to $213/mt FOB Australia for 2013 and 5% to $205/mt FOB for 2014 due to supply growing faster than demand, a Commonwealth Bank research report released Wednesday said.

Previous forecasts for the next two years had been at $237/mt FOB and $216/mt FOB.
This compares with current spot prices of $222.50/mt FOB, according to Platts data.

Demand will fall in the next two years, with global steel mills growing at a "more moderate pace than we had expected," the report said.

The exceptions were China and India which would continue to support global coking coal demand due to limited domestic availability, the report said.

China's steel industry, in particular, was "more resilient than rest of the world" with output at the end of 2012 expected to be "some 2-4% higher than in 2011," based on forecasts by Commonwealth Bank.

The global market for liquefied natural gas (LNG) is expected to be balanced in 2012 and 213, with supply and demand seen around 326 billion cubic metres (bcm) and 350 bcm respectively, BarCap said in its Global Energy Outlook. 

In global coal trading, BarCap said that 2012's import demands of 837 million tonnes would be met by available exports of 843 million tonnes, while 2013 would see import needs of 849 million tonnes met by 850 million tonnes ready for export. 

'European natural gas demand continues to suffer from the weak economy and a poor competitive position against coal, with LNG cargoes being diverted to the higher priced Asian natural gas markets,' BarCap said.

'Coal pricing remains subdued, with weaker demand growth from Chinese steel and power producers, coupled with healthy supply increments from traditional exporters and the U.S., leaving the seaborne market well supplied.' 

The healthy coal exports mean that BarCap expects prices to drop, with API2 (European) prices to average $94 per tonne in 2012, and $92 a tonne in 2013.

The bank's lower price expectations were based on coking coal supply, which was "growing faster than demand," the report said. In particular, this medium- term supply growth "should be dominated by Australia, Mongolia, Mozambique and China's Shanxi province."

Lachlan Shaw, the author of the report, told Platts Thursday that his forecast for the price in the fourth quarter was that it might be around $215-220/mt FOB Australia. Much hinged on the BMA strike situation, Shaw said, "the big watch point for coking coal is supply." 

South African API4 prices were expected to fall from an average of $95 to $94 a tonne between 2012 and 2013, while Australian Newcastle coal prices would see a an annual average decline from $99 a tonne to $97 per tonne. 

Despite healthy coal demand in Europe and Asia, BarCap said that 'the story of the market has been supply, with most exporters able to increase production and U.S. volumes becoming more available