Coking or metallurgical coal, used in steel-making, will likely remain under pressure for the remainder of the year on slack growth in global steel output. However, Indian construction and infrastructure sectors will gain given the lower prices of the steel-making raw material, analysts have said. 

“We maintain our Australian coking coal price forecast for 2024 at USD260/tonne, as prices remain under pressure from poor demand,” said research agency BMI, a unit of Fitch Solutions.

According to the Australian Office of the Chief Economist (AOCE), coking coal prices are falling slowly with supply disruptions easing. “The benchmark prices are expected to fall from $264 a tonne in 2024 to $208 by 2026,” it said in its latest Resources and Energy Quarterly.

World Bank outlook

The World Bank, in its Commodity Outlook, forecast the Australian coal price to fall by 28 per cent in 2024 (year-on-year), and 12 per cent in 2025, while remaining well above the 2015-19 average. 

Coking coal prices were at $242/tonne earlier this week and the steel-making raw material is likely to be under further pressure in the months ahead. “Prices have averaged $275 in the year-to-date, and we continue to expect prices to remain in the range of $220-250 in 2024,” said BMI.

BMI sees limited respite for coking coal this year given global steel production being grim. “Slowing steel production growth in importing nations (except India) will continue to cap coking coal demand, and thus prices in 2024,” the research agency said.

AOCE said prices are forecast to decline from $264 a tonne in 2024 to $208 a tonne by 2026, though this outlook remains subject to significant upside risks.  

La Nina risk

“A potential recurrence of the La Niña cycle presents a risk to supply,” it said. La Nina will likely emerge during August-October this year, according to predictions by various global agencies.

BMI said 2024 has cemented negative investor sentiment over China’s construction industry, the downfall of which now looks irreversible in the coming 2-3 years at least. “As China’s construction industry holds the reigns on coking coal demand through the steel industry (which in turn remains in the doldrums), we see little revival in coking coal prices in the coming months,” the research agency said. 

The Indian factor

Nevertheless, prices will remain high by historical standards over 2025-2028, it said.

The Australian Chief Economist’s Office said strong infrastructure and construction demand is supporting the domestic steel market in India and will continue to do so in the remaining months of 2024. “India’s imports of metallurgical coal are expected to steadily grow over the outlook period (to 2028) as the nation continues to expand its blast furnace capacity,” it said.

India has the second largest pipeline of blast furnace capacity in the world (behind China), with 122 Mtpa of capacity announced and under construction, said AOCE. 

BMI said while India’s coking coal imports are at a 10-year high with shipments of 58 million tonnes (mt) during FY2024, driven by high demand from steel mills, most of this growth has benefited Russia and the US.

This has been detrimental to Australian Newcastle coking coal. “Imports rose 7 per cent  year-on-year from 54.3 mt in FY2023, and while Australia continued to be the largest supplier of coking coal, accounting for 59 per cent or 34.2 mt of overall shipments, this marks a significant decline of its market share of 70 per cent in FY2023 and 81 per cent in FY2018,” the research agency said. 

Russian discount

 Throughout FY2024, Russian coking coal was sold at discounts of 20-25 per cent, while Indian mills also started re-calibrating their furnaces to 1ensure a better mix of high-ash content coal coming in from Russia, said BMI.

AOCE said world exports are expected to experience a dip in 2024 and 2025 due to reduced supply from Russia and Mongolia.  Global production is expected to grow by 1.4-1.9 per cent annually over the outlook period to 2028. 

“Seaborne metallurgical coal import demand is expected to hold steady in 2024 before experiencing modest increases from 2025. Weak steel demand from China’s property sector is expected to be counteracted by higher demand from India’s steel industry,” the Australian agency said.

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