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Australia Lowers Forecasts for Thermal Coal Prices on Weak Demand



October 1, 2019 - Australia's Department of Industry has revised lower its forecasts for thermal coal prices as the market experiences weak demand for the fuel, it said Monday in its Resources and Energy Quarterly.

 In the latest report, the Canberra-based unit cut its forecast from the June edition for the average FOB Newcastle 6,000 kcal/ NAR thermal coal spot price for 2020 by 7% to $68/mt. The 2019 price was also dropped by 7%, to $77/mt, while the forecast for 2021 was lifted by 3% to $69/mt.

"In the first half of 2019, imports from Japan, South Korea and the EU were all lower on a year-on-year basis. While Chinese imports have been resilient, the prospect of tighter import controls have weighed on buying sentiment," it said.

"Persistently low spot LNG prices have also encouraged some coal-to-gas switching - predominantly in Europe - further dampening import demand for thermal coal," it added.

The department sees a weakening in China's imports of thermal coal out to 2021, but has lifted its forecasts for 2019, 2020 and 2021 by 7%, 8% and 9% to 213 million mt, 199 million mt and 185 million mt, respectively.

It marginally tweaked its forecasts for Australian thermal coal exports up by 1% for 2019 to 206 million mt, down 1 million mt for 2020 to 213 million mt and lowered 2021 by 4% to 216 million mt.

"There are several risks to the price outlook for thermal coal. Developments in China's import policies and domestic coal markets are likely to drive ongoing volatility in thermal coal imports and prices," it said.