JOHANNESBURG (miningweekly.com) – BMI Research has revised its 2017 thermal coal price forecast upwards from $70/t to $75/t in the wake of strong Chinese demand, following weather disruptions at hydropower stations.
Towards the end of the year, however, it is expected that the prices will ease as better weather restores Chinese hydropower capacity and the global market is better supplied by increased output from major producers.
“We expect prices to remain elevated over the next three months as Chinese demand will be sustained by weather disrupting hydropower generation across the country. Prices will start easing thereafter as better weather emerges,” BMI said on Friday.
BMI has maintained its 2018 to 2021 forecasts, with the view that prices will weaken owing to better supplies and a global demand shift away from coal once weather issues settle.
“While the Chinese government has started curbing fiscal support to heavy industry, long-term infrastructure and construction projects initiated in 2016 and the first half of this year have ensured that power-intensive activities such as production of industrial materials, construction and transport remain strong,” the company pointed out.
From 2018, demand for power and the prices of coal will ease further as China shifts its economy from heavy industry and construction driven-growth to a services-dependent economy.
In light of this, BMI forecasts prices to stabilise at between $60/t and $75/t.
However, BMI said that, adding to the weak price outlooks for 2018 and beyond was positive growth in global coal production.
“We expect global production to grow by a yearly average of 1.7% during 2017 to 2021, compared with a decline of 0.2% during 2012 to 2016.
“Factors driving the ramp-up in large thermal coal producers, such as Indonesia, Australia and the US include the strong recovery in coal prices since 2016, strong demand from coal-fired power plants in emerging Asia and low-cost production by major players,” BMI concluded.