Why analysts worsen the forecast for energy coal prices
Due to the decrease in demand and risks of slowing the world economy, which is under pressure from trade duties, analysts are reviewing forecast energy coal prices. In such conditions, Russia is unlikely to be able to return to the indicators of coal export 2021–2022 in the foreseeable future, although the market can support the demand for cheap coal generation.
NEFT Research analysts revised the forecast regarding the prospects for the energy coal market to 2025–2026, reducing the expected price level by 13-15% compared to the previous calculation. According to the company’s review, this was influenced by the current negative dynamics of the market and the expectation of a slowdown in the global economy after the introduction of the United States of trade duties.
As stated in the review, in the first quarter the world quotes of energy coal decreased by 10-15% of the quarter to the quarter against the backdrop of a reservation due to the warm winter and the availability of alternative fuel types.
The volumes of coal imported to China in the first quarter fell to a minimum in three years-according to some estimates, by 15% of the year-due to sufficient reserves in ports and power plants, analysts indicate. According to KPLER, which REUTERS quoted, China in the first quarter imported 67 million tons of energy coal against 85 million tons a year earlier. Purchases were reduced by other large importers – India, Japan and South Korea.
The new forecast for Neft Research suggests that in 2025–2026, energy coal prices of 5500 kcal at the FOB Newcasl base will be in the range of $ 69–76 per ton. Quotes in Europe (CIF ARA 6000 kcal) are expected at $ 88–94 per ton, FOB prices Richards Bay 6000 kcal (South Africa)-$ 80–89 per ton.
The price of Russian energy coal prices in the north-west in 2025–2026 NEFT Research predicts $ 68–70 per ton, in the south-$ 78–80 per ton. The expected level of price for coal 5500 kcal in the east is $ 69–73 per ton. The last forecast assumed that these quotes would be at $ 79–82, $ 86–89 and $ 76–84 per ton, respectively.
According to Neft Research, the slowdown of the economy will lead to a reduction in coal consumption in China-the largest import fuel importer, in India, the growth rate of imported supplies will slow down due to the development of internal prey, and the demand in a number of Southeast Asia countries will increase modest pace. S&P Global, citing sources, notes that US duties and China’s response can undermine the general mood of the market and cause concerns regarding consumer demand.
According to the Center for Price Index (CCI), the energy coal index on the FOB Far East is at $ 77 per ton for coal 6000 kcal and $ 68–69 per ton for 5500 kcal coal. Quotes on the CFR basis China – $ 75 per ton. The Director of the CCC Evgeny Grachev says that the increase in the supply of coal supply, primarily an increase in production in China, affected the reduction of prices to these levels. But, according to him, low prices are now creating problems not only for coal exporters, but also for local Chinese manufacturers. Neft Research partner in consulting Alexander Kotov notes that with the current conjuncture, some coal mining companies restrain production and shipment. “We calculate that this activates demand and will positively affect Russian quotes,” he says.
As noted in the NEFT Research review, the unfavorable world situation will put pressure on the export potential of the Russian industry.
Analysts admit that shipments abroad in the foreseeable future will not recover to indicators of 2021–2022, given the abolition of quotas for the export of coal to the east for most regions. In 2021–2022, coal exports from the Russian Federation were at the level of 227 million tons and 210 million, respectively. According to the Ministry of Energy, which were given by Kommersant’s interlocutors, the current dynamics threatens to reduce coal export from the Russian Federation in 2025 by 29.4 million tons, to 166.5 million tons. As Mr. Kotov notes, the situation of coal mining companies will depend on state support measures that are discussed at the government level (See “Kommersant” from March 19). Otherwise, the situation for coal miners will worsen, a wave of bankruptcy is possible, since the margin of safety from the previous “well -fed” period ends, says Alexander Kotov. The interlocutors of Kommersant in coal companies did not answer questions.
Although a number of analysts believes that the aggravation of trade confrontations can also support the coal market. According to Yevgeny Grachev, in a crisis, the priority is usually given to cheaper energy sources, so the scenario of more sustainable demand for cheap coal generation is also likely. Independent industrial expert Maxim Shaposhnikov says that in this case, coal quotes can grow by $ 5-10 per ton before the end of the year, and Russian exports will be reduced by 5–7% compared to last year’s level.
In the market of metallurgical coal, analysts do not yet expect significant deterioration in conjuncture. Boris Boris Krasnozhenov, head of the securities market for securities, says that China is unlikely to significantly reduce steel smelting, and India plans to almost triple production in five to seven years. At the same time, according to him, there are no new large projects on the market except Russian. And although at current prices, export of semi -hard and soft brands of coking coal can be on the verge of profitability, export of solid coking coal from deposits in Yakutia remains economically attractive, the analyst says. He expects that the prices of solid coking coal can return to the level of $ 200 per ton on the horizon of three to six months.
