Metallurgical Coal Market to Shift into Surplus by 2025, BofA Securities Predicts
In a recent update, BofA Securities analysts have forecasted a transition in the metallurgical coal market, indicating a potential surplus by 2025. This shift is a result of increased production from key suppliers like the United States and Mongolia, alongside a decrease in demand, particularly from China.
As the market dynamics evolve, BofA anticipates a surplus by 2025, leading to a downward pressure on prices. Currently, Australian hard-coking coal prices have already dropped to $180 per tonne, influenced by sluggish steel production and heightened coal supply.
Despite the price decline, suppliers are reluctant to sell below $200 per tonne, factoring in freight costs. This resistance to lower pricing is supporting the met coal prices, but further drops could trigger supply cuts, especially in North America.
The main driver behind the expected surplus is the reduced demand from China, the largest consumer of coking coal globally. The country's steel industry is facing challenges, resulting in lower steel prices and decreased demand for met coal.
On the other hand, India is emerging as a significant player in coking coal demand due to infrastructure and housing projects. However, BofA believes that India's demand growth will not be sufficient to prevent the market from entering a surplus by 2025.
Looking ahead, while the surplus may limit price hikes, factors like strong demand from India and supply disruptions from Australia could temporarily support prices in the short term.
In conclusion, the transition to a surplus in the metallurgical coal market by 2025 could impact global prices and supply dynamics. Investors and stakeholders should monitor these developments closely to make informed decisions regarding their investments and financial strategies.
