Powered by Asia's continuing demand, the global seaborne thermal coal market is expected to grow by around 48 million mt or 5% from 2017 to touch 974 million mt in 2018, trading house Noble Group said Tuesday.
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While the spike in demand will largely come from Asia, the market is contemplating the supply to be short by about 10 million mt, it added.
"2018 will be another strong year for the coal market along with most other commodities," Rodrigo Echeverri, head of hard commodities analysis, Noble Resources International, said at the Coaltrans conference in Goa.
Given the burgeoning demand, it will be challenging on the supply side to match the current appetite for thermal coal.
"Overall the market looks under-supplied. There is some supply response. But [it is] nowhere near enough to eclipse the demand-driven rally," Echeverri said.
Only the US, Indonesia and Russia were able to increase their production in 2017.
"USA will be the marginal swing producer when Newcastle coal prices can stay above $80/mt for a reasonable time," Echeverri said.
While Indonesian production is growing, its domestic consumption too has been increasing.
"If Indonesia grows by 25 million mt, it will reach its all-time high production level. This level has not been tested before and will not come without hiccups," he said.
DEMAND GROWTH FROM USUAL CENTERS
With the global synchronized macro strength, demand is expected to grow, Noble Group said in its presentation at the conference.
"In China, we are at the beginning of a new construction cycle looking at the increase in land purchases," Echeverri said, adding that Indian steel production was expected to increase by about 10% in 2018, which would have a knock-on effect on power demand and hence coal consumption.
In the case of India, domestic coal production targets set by the government could be difficult to attain, speakers at the conference said.
"Interest has been subdued for subsequent coal block auctions in India," said V.K. Arora, chief mentor at Karam Chand Thapar & Bros, a major coal trader in India.