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Coking coal futures signal tighter global supply long term: Seaport Global

06 Sep 2018

A rise in coking coal futures prices for 2020 and 2021 this year may indicate acceptance of tighter supply in the long term, US investment bank Seaport Global said Wednesday.
 
Global supplies may tighten, especially from the US, which has been known as a marginal swing supplier, and is now constrained by regional contract demand and structural barriers to mining growth.
"We think met coal buyers have slowly begun to recognize the tightness in the met coal supply chain and the potential sustainability of demand," Seaport Global analysts led by Mark Levin said. "We continue to believe demand is the greatest risk to the met price, not supply."
 
On Tuesday, the SGX exchange showed 2020 and 2021 strips pricing at $164.50/mt and $159/mt, respectively, up from $144/m and $130/mt at the beginning of January, Seaport Global said in a report. The prices are for settlement on the TSI Premium HCC FOB Australia.
 
Supply shocks, due to cyclones and mining geology, have led met coal prices to surge three times in the past two years, with average prices sticking well above the $150/mt FOB mark for premium coking coal.
 
Buyers have said they look at met coal prices as persistently high, and above their long-term expected pricing.
 
US domestic demand growth has been adding support to US tons, which had seen exports rebound in 2017 and 2018, especially for high-vol Bs and as some idled mines returned.
 
"As it relates to the US specifically, capital is scarce, people are scarce, equipment is scarce, and quality reserves are scarce. This should help constrain supply, at least from our shores," Seaport Global said.
 
Source: SP Global