Thermal Coal Prices: What’s In Store for 2017?

Thermal coal prices more than doubled last year after China reduced the number of working days at most of its mines. After soaring in 2016, thermal coal prices fell in 2017 after China said it would relax its regulations on coal miners. They have since pulled above their lows but now we are in the low demand season for the commodity which opens up the question – are we headed for another collapse?

Weighing in on its expectations for the thermal coal market, Citi analysts said they expect Chinese domestic thermal coal prices to be supported by robust industrial power demand and slower-than-expected supply additions this year. When it comes to pricing – they expect the Chinese 5,500 kcal/kg NAR thermal coal price could average Yuan 500-600/mt in 2017. “We anticipate Chinese thermal coal demand to stay flat in 2017 after a slight 1% year-on-year decline in 2016, thanks to robust industrial power demand, and supply rising 7% year on year after a 8% decline last year. Thermal coal looks tightish in the near term, but Chinese supply should come back rapidly in the second half of 2017, and overseas miners are targeting marginally higher output,” the analysts said.

While the outlook is positive for China, there are bearish expectations for coal imports from India. This; however, isn’t necessarily a reflection of demand – it is because the country is stepping up domestic coal production.In January, India’s energy minister pledged to end India’s imports of coal within a few years.

BMI Research, predicts thermal coal prices will drift lower but hold onto much of their recent gains on the back of strong demand from China. In their most recent report on the coal market, BMI upped its price expectations for this year and 2018 and now forecasts thermal coal to trade in the range of $70 to $90 over the next three to six months. The firm noted that the thermal coal supply situation has improved – but demand from China will provide continued support to prices.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.