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Newcastle thermal coal price may touch $60/mt in next 18 months: ANZ

Singapore — Newcastle spot thermal coal prices may fall to as low as $60/mt in the next 18 months before recovering, ANZ analysts said Thursday.

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In a note, the analysts expect Newcastle 6,000 kcal/kg NAR coal spot price to touch $64/mt FOB in December next year and head further down to $60/mt by June 2021.

The analysts expect the price to rebound to $70/mt FOB by June 2022.

Weakness in coal-fired capacities in China may have an impact on the country's demand for seaborne coal, as renewable energy capacity additions make a significant jump, the analysts said.

"Growth in renewable energy is strong," ANZ said, adding that electricity generated in China this year by renewables in January-October was up 8% on the year, compared with only a 3.9% growth in thermal power generations.

The opening of a major train line in China has been a boost to domestic production this year, the analysts said.

China's 1,815 km Haoji Railway, which is hailed as the world's longest coal-hauling railway line, started operations in September after about seven years of construction.

"Lower domestic prices have also impacted demand for imported coal," ANZ noted.

The price of PCC 1 FOB Qinhuangdao 5,500 kcal/kg NAR domestic coal has fallen 6% so far this year, to be assessed Wednesday at Yuan 545/mt, S&P Global Platts data showed.

China has put in place restrictions on Australian coal imports for most part of the year and there is no indication that it may be lifted any time soon, sources said, and this has boosted demand for both Indonesian and Russian origin material.

Over the last few years, China has also tried to restrict imports by introducing the quota system to limit annual seaborne cargo arrivals at various ports across the country.

Despite the restrictions, China imported 299.3 million mt of coal, including thermal and coking coal, over January-November, up 10.2% on the year, exceeding its 2018 full year import volume of 281 million mt, recent customs data showed.

"We expect China's quota system to have only a minor impact on coal imports," ANZ said. "The increased regulations are a result of high inventories in China, which have weighed on domestic prices."

China has stocks enough to last for 22 days of coal burn, according to sources.

-- Deepak Kannan, deepak.kannan@spglobal.com

-- Edited by Aastha Agnihotri, aastha.agnihotri@spglobal.com