Global metallurgical coal market outlook - Eurocoke - Amsterdam April 2019 - The Coal Hub
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Global metallurgical coal market outlook
Eurocoke – Amsterdam
April 2019
Trusted Intelligence woodmac.com
1woodmac.com
Aus LV price collapsed below global marginal cost in May 2020
Aus. supply and Chinese steel reform kept spot prices at US$205/t
Late 2019, decoupled with China - in April redirected cargoes from India and Japan
Australian LV monthly average spot prices and marginal cost (US$/t)
$350
$300
$250
Aus LV US$/t spot FOB
$200
$150
$100
$50
$0
Jan 16 May 16 Sep 16 Jan 17 May 17 Sep 17 Jan 18 May 18 Sep 18 Jan 19 May 19 Sep 19 Jan 20 May 20
Aus LV spot price 2020 Global marginal cost
Source: ArgusMedia, Wood Mackenzie Coal Market Service
2woodmac.com
Wood Mackenzie high/low case scenarios for the global economy
The current coronavirus looks more aligned with our low case than our base case, as the
rate of new occurrences has increased
Global GDP estimates (% change)
Base case
• Q2 2020 low point for global economy
8 • Restrictions lifted through 2020
6 • No significant second wave
• Vaccine arrives in 12 to 18 months
4
• Economies free from restrictions in 2021
2
GDP growth (%)
0 Downside scenario:
2019 2020 2021 2022 2023 2024 2025
-2 • Easing lockdowns in Q3 2020 cause rise
-4
• Lockdowns reinstalled in Q4 2020
• Stringent lockdown in H1 2021
-6
• Ease in H2 2021, w/social distancing
-8 • Vaccine delayed until 2022
-10
Upside scenario:
Base case (Q2 2020)
• Q2 2020 low point for global economy
Downside Scenario: prolonged pandemic 2020 and spike in H1 2021
• Free of restrictions by end Q3 2020, m
Upside Scenario: accelerated lifting of lockdown
• Vaccine ~12 months after outbreak
Source: Wood Mackenzie Macroeconomics • Minimal log-term scars on economy
3woodmac.com
Led by auto plant idles, numerous European blast furnaces idled
European BF idles remove about 2.1 Mt per month of hot metal, This equals ~1.2 Mt of
lowered met coal demand. We are not optimistic that furnaces will return soon
European 2020 monthly hot metal loss (Mt) Europe 2020 demand loss for coal and coke (Mt)
2.5 1.4
2.0 1.2
1.5 1.0
Average monthly loss (Mt)
Mt
1.0 0.8
0.5 0.6
0.0 0.4
March April May June July
Donawitz Linz Ostrava Raahe 0.2
Dunkirk Fos-sur-Mer Bremen Eisenhuttenstadt
Salzgitter Duisberg Asturias Luleå
0.0
Oxelösund Port Talbot Imjuiden Coke Coking coal PCI Met coal
Source: Wood Mackenzie
Source: Wood Mackenzie
4woodmac.com
Brazilian blast furnaces also trimmed back blast furnaces
Hot metal production was lowered by about 0.4 Mt per month. Gerdau is restarting, with
seeing potential in steel exports. CSN, sees opportunity in direct sales of their iron ore.
Brazilian 2020 monthly hot metal loss (Mt) Brazilian 2020 demand loss for coal-coke (Mt)
0.5 0.3
0.5
0.4 0.2
0.4
0.3
0.2
Mt
0.3
Mt
0.2
0.1
0.2
0.1
0.1
0.1
0.0
March April May June July
0.0
Coke Coking coal PCI Met coal
Tubarao Ipatinga Ipatinga Ouro Branco CSN
Source: Wood Mackenzie Source: Wood Mackenzie
5woodmac.com
At the current spot price, ~60-65% of US met is out of the money
Domestic business, signed late-2019, provides some support. However, we expect some
cubacks during H2 2020
Low-vol spot price vs cash costs (US$/t FOBT) High-vol A spot price vs cash cost (US$/t FOBT)
US LV spot price H1
Cash costs US$/t FOBT)
Cash costs (US$/t FOBT)
US HVA spot price
June
0.0 1.0 2.0 3.0 4.0 5.0 6.0
Pre-COVID 2020 producion estimate (Mtpa ) 0.0 2.0 4.0 6.0 8.0 10.0
Pre-COVID 2020 production estimate (Mtpa)
Source: Wood Mackenzie , Argus Media group
Source: Wood Mackenzie, Argus Media group
6woodmac.com
US idled numerous mines as the coronavirus began to spread.
Nearly 2.5 Mtpa was lost in March and April. Stocks were high and small crews were
maintained for shipments. Some new HV mines are still being developed.
US mine idles by company (Mt) New HV mines being developed (Mt)
16
0.6
14
0.5 12
10
0.4
Lost output (Mt)
Mt
8
0.3
6
0.2 4
0.1 2
0
0.0 2018 2019 2020 2021 2021
Leer Leer South
North Central Resources Mountain Laurel
Blue Creek
Source: Wood Mackenzie Source: Wood Mackenzie Coal Market Service
7woodmac.com
US met coal exports have fallen off, in step with the seaborne price
With falling prices, exports are declining rapidly. April exports hit the rate of 34 Mtpa, and
May looks to be in the upper 20s Mtpa. EMEARC purchases are declining.
Monthly exports by import country (Mt) Monthly exports by import region (Mt)
5.0 250
5.0
4.5 4.5
4.0 200
4.0
3.5 3.5
Mt per month
Mt per month
3.0 150
US$/t FOB
3.0
2.5
2.5
2.0 100
2.0
1.5
1.5
1.0 50
1.0
0.5
0.5
0.0 0
0.0
Jan 19 May 19 Sep 19 Jan 20
Jan 19 May 19 Sep 19 Jan 20
Brazil Japan India
Neth/Ger Ukraine S. Korea EMEARC Asia Americas
Other Aus LV price Source: Global Trade Tracker, Wood Mackenzie
Source: Global Trade Tracker,Wood Mackenzie
8woodmac.com
Often, the US and Australia are mirror images on tonnes to Europe
However, both supply regions have seen a decline in sales. Queensland’s exports have
been challenging, with outages at Grosvenor and Moranbah North.
Queensland total monthly met exports (Mt) Monthly exports to Europe (Mt)
18
2.5
16
14 2.0
Met exports (Mt/month)
Mt per month
12
1.5
10
8
1.0
6
4 0.5
Jan Mar May Jul Sep Nov Jan 19 May 19 Sep 19 Jan 20
2020 2017 2018 2019 US Aus
Source: Wood Mackenzie, port data Source: Global Trade Tracker, Wood Mackenzie
9woodmac.com
We forecast a lowering of nearly 30 Mt in trade in 2020, with half of
that regained next year.
As the swing supplier to the seaborne market, the US will take the bulk of the decline – at
over 10 Mt. Australia, with FX issues and rising fuel costs may lose about 9 Mt.
2019 to 2021 seaborne trade (Mt) Annual export changes – 2020/21 (Mt)
350
6.0
300
4.0
250 2.0
Y-O-Y Change (Mt)
0.0
200
-2.0
Mt
150 -4.0
-6.0
100
-8.0
50 -10.0
-12.0
0 Australia US Canada Mozamb. Russia Other
2019 2020 2021
2020 2021
Australia US Canada Mozamb. Russia Other
Source: Wood Mackenzie Coal Market Service
Source: Wood Mackenzie Coal Market Service
10woodmac.com
Our long-term story is only marginally lower - metallurgical coal will
rise from 286Mt in 2020 to 404 Mt by 2040
Australia will capture most of the growth - low costs and a location relatively close to India
Global metallurgical coal imports to 2040 (Mt) Changes in exports 2020 versus 2040 (Mt)
450
400 Vietnam
350 United States
300 Ukraine
South Africa
250
Mt
Russia
200
Poland
150
New Zealand
100 Mozambique
50 Indonesia
0 Colombia
2008
2012
2016
2020
2024
2028
2032
2036
2040
China
Canada
Brazil China France Germany
Australia
India Japan South Korea Taiwan
Turkey United Kingdom Other -20 0 20 40 60 80
Source: Wood Mackenzie Coal Market Service
Mt
Source: Wood Mackenzie Coal Market Service
11woodmac.com
Key messages
Of course, there is much risk to any forecast, given these uncharted waters – stay well.
The coronavirus pandemic has caused a tremendous lowering of steel demand for
2020. Blast furnaces across Europe and Brazil went idle,
US mines responded, with many going idle for much of March and April, reducing
output by about 2.5 Mt. However, stocks were high and loadings continued. Spot price
declines have resulted in 60-56% of US producers below water.
2020 could see a reduction of just under 30 Mt in seaborne trade, regaining half of that
back in 2022.
We expect to see price improvement late in the year, as China will get a stimulus boost
and continue to need high-quality imports, despite the the threat of import restrictions.
India’s buying should pick up after the monsoon season.
The spot price for premium Australian low-vol should rise to nearly US$150/t by the end
of the year and improve slightly in 2021.
12woodmac.com
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