Coal Seen Rebounding as China Sets Steel Output Record
Coking coal prices are set to rebound as early as July from four straight quarterly declines asChina and India seek raw material overseas to fire new steel production in the world’s fastest-growing major economies.
Contract prices that fell to $206 a metric ton for the quarter ending June 30 may rebound to average $225 a ton this financial year, based on the mean estimate of 10 analysts, steelmakers and mining companies surveyed by Bloomberg. Contracts of coking coal, a key ingredient used to make steel, peaked at $330 in the June quarter last year.
China, the largest steel producer, is leading demand growth forecast at almost 10 percent this year. It started about 10 new blast furnaces in the past six months, lifting output to a record in March, according to market researcher Custeel.com. India, the third-biggest steelmaker, is set to boost capacity a third to more than 100 million tons by March in a five-year $1 trillion plan to build roads, bridges and railway networks.
“Rising Indian imports will have a positive impact on coking coal,” said Natalie Robertson, an analyst at ANZ Banking Group Ltd. in Melbourne. “The near-term prices will more closely track development in China.”
China may surpass Japan as the biggest coking coal importer by 2015, a position it may eventually relinquish to India, Robertson said.
China is encouraging global use of the yuan and allowing more overseas investors in its localcapital markets as Premier Wen Jiabao seeks to shift the focus of economic growth to domestic demand from slowing export industries. The government broadened the yuan’s trading band against the dollar to 1 percent from its daily reference rate on April 16, having held the limit at 0.5 percent since May 2007.
Recovery Forecast
Growth in China slowed more than forecast last quarter to the least in almost three years, prompting economists to predict a rebound as the government loosens policy to counter weak domestic and European demand. Gross domestic product expanded 8.1 percent from a year earlier after an 8.9 percent fourth- quarter gain, the National Bureau of Statistics said.
Demand for imported coking coal in China may rise 37 percent to 63 million tons this year from last year, Australia’s Bureau of Resources and Energy Economics said on March 21. Consumption is projected to increase due to state investment in steel-intensive infrastructure such as highways and rail networks, linking the less-developed provinces in western China to demand centers in the east, it said.
Infrastructure Demand
Urbanization and infrastructure building in central and western China will fuel “very strong” steel demand, Fortescue Metals Group Ltd. (FMG) Chief Executive Officer Neville Power said on April 3. The 7.5 percent economic growth target Jiabao announced for this year, the lowest since 2004, may result in 5 percent annual increases in steel demand, he said.
Global trade in coking coal may rise 9.6 percent to 297 million tons this year, compared with a 0.7 percent drop last year, the Bureau of Resources and Energy Economics said.
Mongolia, which became China’s biggest supplier of coking coal in July, will probably continue to grow this year, Battsengel Gotov, chief executive officer at Mongolian Mining Corp. (975), said in a March 7 interview.
“For Europe, China, Japan and South Korea, the main tailwind for metallurgical coal is there’s room for restocking across the world,” Bloomberg Industries analyst Andrew Cosgrove said. “China remains the wild card because Mongolia is stealing seaborne volumes by exporting more land-borne tonnages.”
Indian Imports
India’s coking coal needs may jump 13 million tons this financial year as its rising appetite for the alloy drives companies to add capacity worth at least $10 billion in the year that started April 1, said Ashish Upadhyay, associate director at Fitch Ratings in a telephone interview on April 9. Indian demand may support coking coal prices as most of the local requirements are met through imports, he said.
Last year, India imported 13 percent of the 271 million tons of coking coal traded globally. Australia is estimated to have shipped 148 million tons of the steelmaking ingredient in the year ended March 31, the Bureau of Resources and Energy Economics said in its March 21 report.
Coking coal prices touched a record last year after floods disrupted output and shipments from mines in Australia, the world’s biggest exporter of the fuel, said Arun Kumar Jagatramka, chairman of Gujarat NRE Coke Ltd. (GNC), which owns mines in Australia’s New South Wales state. Prices have since declined as supplies were restored and demand waned in Japan and in debt- laden Europe.
Auto Sales
Indian steel consumption may increase 8 percent during the year started April 1, faster than last year’s growth of 5.5 percent, fueled by investment in infrastructure projects and improving sales of automobiles, said G.K. Basak, executive secretary at the steel ministry’s joint plant committee.
Demand may improve as India reduces interest rates on loans, critical for developing industrial projects and buying homes, cars and appliances, said Tapan Ray, executive director for mining at PricewaterhouseCoopers Ltd. in Mumbai. Coking coal prices may range between $220 and $230 a ton this year and may rise higher if a European recovery starts, he said.
To contact the reporters on this story: Rajesh Kumar Singh in New Delhi atrsingh133@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net
Contract prices that fell to $206 a metric ton for the quarter ending June 30 may rebound to average $225 a ton this financial year, based on the mean estimate of 10 analysts, steelmakers and mining companies surveyed by Bloomberg. Contracts of coking coal, a key ingredient used to make steel, peaked at $330 in the June quarter last year.
China, the largest steel producer, is leading demand growth forecast at almost 10 percent this year. It started about 10 new blast furnaces in the past six months, lifting output to a record in March, according to market researcher Custeel.com. India, the third-biggest steelmaker, is set to boost capacity a third to more than 100 million tons by March in a five-year $1 trillion plan to build roads, bridges and railway networks.
“Rising Indian imports will have a positive impact on coking coal,” said Natalie Robertson, an analyst at ANZ Banking Group Ltd. in Melbourne. “The near-term prices will more closely track development in China.”
China may surpass Japan as the biggest coking coal importer by 2015, a position it may eventually relinquish to India, Robertson said.
China is encouraging global use of the yuan and allowing more overseas investors in its localcapital markets as Premier Wen Jiabao seeks to shift the focus of economic growth to domestic demand from slowing export industries. The government broadened the yuan’s trading band against the dollar to 1 percent from its daily reference rate on April 16, having held the limit at 0.5 percent since May 2007.
Recovery Forecast
Growth in China slowed more than forecast last quarter to the least in almost three years, prompting economists to predict a rebound as the government loosens policy to counter weak domestic and European demand. Gross domestic product expanded 8.1 percent from a year earlier after an 8.9 percent fourth- quarter gain, the National Bureau of Statistics said.
Demand for imported coking coal in China may rise 37 percent to 63 million tons this year from last year, Australia’s Bureau of Resources and Energy Economics said on March 21. Consumption is projected to increase due to state investment in steel-intensive infrastructure such as highways and rail networks, linking the less-developed provinces in western China to demand centers in the east, it said.
Infrastructure Demand
Urbanization and infrastructure building in central and western China will fuel “very strong” steel demand, Fortescue Metals Group Ltd. (FMG) Chief Executive Officer Neville Power said on April 3. The 7.5 percent economic growth target Jiabao announced for this year, the lowest since 2004, may result in 5 percent annual increases in steel demand, he said.
Global trade in coking coal may rise 9.6 percent to 297 million tons this year, compared with a 0.7 percent drop last year, the Bureau of Resources and Energy Economics said.
Mongolia, which became China’s biggest supplier of coking coal in July, will probably continue to grow this year, Battsengel Gotov, chief executive officer at Mongolian Mining Corp. (975), said in a March 7 interview.
“For Europe, China, Japan and South Korea, the main tailwind for metallurgical coal is there’s room for restocking across the world,” Bloomberg Industries analyst Andrew Cosgrove said. “China remains the wild card because Mongolia is stealing seaborne volumes by exporting more land-borne tonnages.”
Indian Imports
India’s coking coal needs may jump 13 million tons this financial year as its rising appetite for the alloy drives companies to add capacity worth at least $10 billion in the year that started April 1, said Ashish Upadhyay, associate director at Fitch Ratings in a telephone interview on April 9. Indian demand may support coking coal prices as most of the local requirements are met through imports, he said.
Last year, India imported 13 percent of the 271 million tons of coking coal traded globally. Australia is estimated to have shipped 148 million tons of the steelmaking ingredient in the year ended March 31, the Bureau of Resources and Energy Economics said in its March 21 report.
Coking coal prices touched a record last year after floods disrupted output and shipments from mines in Australia, the world’s biggest exporter of the fuel, said Arun Kumar Jagatramka, chairman of Gujarat NRE Coke Ltd. (GNC), which owns mines in Australia’s New South Wales state. Prices have since declined as supplies were restored and demand waned in Japan and in debt- laden Europe.
Auto Sales
Indian steel consumption may increase 8 percent during the year started April 1, faster than last year’s growth of 5.5 percent, fueled by investment in infrastructure projects and improving sales of automobiles, said G.K. Basak, executive secretary at the steel ministry’s joint plant committee.
Demand may improve as India reduces interest rates on loans, critical for developing industrial projects and buying homes, cars and appliances, said Tapan Ray, executive director for mining at PricewaterhouseCoopers Ltd. in Mumbai. Coking coal prices may range between $220 and $230 a ton this year and may rise higher if a European recovery starts, he said.
To contact the reporters on this story: Rajesh Kumar Singh in New Delhi atrsingh133@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net
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