RE: re looked at the mmo investment7 Jun 2014 21:42
Despite continuing issues relating to overcapacity and significant cost pressures throughout the global steel production sector, total global demand for steel continues to increase, resulting in increased demand for metallurgical quality coal (including anthracite). However, the metallurgical coal market is also facing a low point with oversupply resulting in lower prices.
Longer-term, these fundamentals suggest that prices have reached, or are close to reaching, the bottom of the market. Prices have yet to make a strong and sustained recovery. In March 2014, Goldman Sachs cut its metallurgical coal price estimate for this coming year to US$141 per metric ton from US$150 and lowered projections for next year and 2016, citing oversupply and sluggish Chinese demand growth.
On the other hand, the global steel industry is expected to make a recovery this year, led by a rebound of production in Europe and the rest of the world, offsetting the Chinese slowdown, and both ArcelorMittal and Tata Steel have recently noted modest improvements in demand for steel, offering grounds for cautious optimism for a price recovery.
Anthracite is the most versatile and high-quality metallurgical coal, and represents just 1% of the world's coal reserves. There are few new high-quality deposits in mining-friendly jurisdictions, which suggests a future supply imbalance, supporting future high prices.
Most importantly, while China and other Asian markets continue to increase steel production, demand for metallurgical quality coal is expected to remain strong.
Sign In
Follow the stocks
