Morgan Stanley cuts coking coal price forecast

Spanish Market: Coal, Coking coal, Metals
25/06/13

London, 25 June (Argus) — US bank Morgan Stanley has cut its price forecast for premium hard coking coal by 10pc for the third quarter, warning of further mine closures.

The bank estimates average third-quarter spot prices of $140/t fob Australia, down by 10pc on its previous forecast, and average fourth-quarter prices of $150/t, down by 12pc. Morgan Stanley predicts that the average 2013 spot price will be $156/t, close to the Argus average spot price so far this year of $155.64/t fob Australia. The bank's 2014 estimate has fallen by 6pc to $164/t.

Oversupply is the main reason for the softening spot market, Morgan Stanley said, giving the bank reason to expect further coking coal mine closures this year. A spot price of $133/t fob makes around 46mn t or 16pc of the seaborne market uneconomic, the bank said. US Appalachian producers will be the most affected as they price at $150-200/t on the seaborne cost curve, so Morgan Stanley expects them to be the subject of the next wave of closures.

Supply is likely to outweigh demand until 2018, but only by 2.4mn t this year, the bank said. It expects US exports to fall to 53mn t this year, from 64mn t in 2012.

Morgan Stanley has left its iron ore price forecast unchanged at $128/t cfr north China for the third quarter, $125/t for the fourth quarter and $132/t for 2013. It expects China to import 741mn t of iron ore this year, up by 4.6pc on 2012. But the price crash in the third quarter of last year is unlikely to be repeated as mills and ports are now retaining low inventories. These low stocks are an indicator of support at the prevailing price level, Morgan Stanley said, and explain the recent rebound when prices fell to around $110/t. This echoes the prevailing market sentiment, which puts $110-120/t as a stable price.

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