The seaborne metallurgical coal market is expected to reached 394 million mt by 2035, 51% above the 2012 level of 261 million mt, Jim Truman, principal analyst wtih consultant Wood Mackenzie said Tuesday.
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Speaking at the Met Coke World Summit in Pittsburgh, Truman said most of the growth will occur in Asia because of the growing Chinese and Indian economies. Asia accounts for about 69% of seaborne coal demand with the remaining 31% in the Atlantic market.
Despite being the world's biggest producer of metallurgical coal, China will continue to import seaborne material because domestic production is projected to remain flat, Truman said. Shanxi's coal production will "tend to look like the production from Central Appalachia," Truman added. The Central Appalachia region used to be a key coal mining industry in the US before begam a slow decline in recent years. The Shanxi province is the key metallurgical coal centers in China.
"[The] depth of coal seams are quite large [in Shanxi] and alot of obstacles are present" to prevent much new production, he said.
Indian coal producers are mining a product that cannot be used in steelmaking because of high ash content, meaning there is 'very little potential for much market growth," Truman said.
He said Australia would most likely stand to see the greatest benefit from the increase in Asian demand for imported met coal, given the fact that it has the lowest cost structure of all exporters.
Truman estimated that Australia could capture 83% of the projected growth by 2030.
The US, as a swing-supplier in the seaborne world, is expected to continue to decline in the export market by losing 13 million mt of its exports by 2030, Truman added. Lower cost material offered by other countries was the key reason, Truman explained.
In terms of price expectations, Truman believes spot prices for premium low-vol coals are unlikley to drop to the $210-220s/mt FOB Australia level seen in 2010-2012.
Platts assessed the spot price Tuesday at $145.25/mt FOB Australia for coal with similar grade.