Metallurgical coal prices may decline

A Fitch Research report predicts that metallurgical coal prices will fall from their current high levels over the next 18 months. The main focus of mining companies is likely to be on cost control.

According to a market researcher, costs in the global coal metallurgy sector increased by 18% in 2017 and continued to rise in 2018. “Negative weather has played a role in Australia, leading to supply chain disruptions, fines and increased costs for storing raw coal. However, costs have also been increased globally by higher oil prices and efforts by mining companies to increase production to take advantage of high prices, ”the report said.

Fitch analysts said margins were not undermined because coking coal prices are currently high enough to counterbalance costs. Fitch experts believe that the metallurgical coal market is unlikely to experience overproduction in the near future. Therefore, prices are unlikely to fall off the cost curve as they did between 2014 and 2016.

This state of affairs could benefit mining companies and earthmoving equipment manufacturers as miners continue new projects and increase production.

The market researcher emphasizes that caution should be exercised, however, as prices have already dropped from a high of $ 260 per tonne and are likely to decline as supply constraints continue to ease. “Fitch's current assumptions are that hard coking coal prices this year will average USD 185–140 per tonne. These cuts could put pressure on some less competitive mining companies to lower the cost of protecting profits, ”the market analysis said.