Met coal prices are plummeting and oversupply is the problem, says Goldman Sachs. On Friday, Goldman cut its metallurgical coal average price estimate for 2014 to $141 per metric ton from $150 due to higher Australian output and slower demand from China along with “limited U.S. supply rationalization.”
Bank of America Merrill Lynch agrees that miners need to idle capacity to return to more normal pricing but global producers are unwilling to do so. BofAML says the “seven-year low met coal spot prices as reported by Platts reflects a deeply troubled market.”
As of Friday, March 7, Platts reported spot premium low-vol met coal prices FOB Australia were $113.25 per metric ton, down from $119.30 per metric ton the previous week.
Platts says coking coal prices have dropped nearly 30 percent over the past year. Normally, monsoon weather in Australia will slow down exports and push prices up, but the normal pattern hasn’t emerged so far this year.
“Everyone is pointing to potential reasons for the weaker prices, but it most likely comes down to supply-demand fundamentals,” said Platts in the latest issue of Steel Raw Materials Monthly. “The market for hard coking coal is oversupplied and demand is lackluster due to weak steel prices and production in China.”
At the Coaltrans USA Conference last month in Miami, conference participants concurred that global oversupply is a problem. Coltrans USA attendee Ernie Thrasher, CEO of Xcoal, a leading US met coal supplier, estimates that it may take two years to recover from lower revenues and supply rationalization.
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