If analyst are to be believed 2013 certainly augurs well for the coking coal market. Increased steel production projections by 3% touching 1.6 billion tones will catalyze turn around towards the Q2 as the initial days will continue in the hangover of economic recession in 2012.
One of the main triggers will come from the usual quarters of imminent economic revival in China. Remarkably the Chinese economy has shown improved economic indicators in Q4 which is unlikely to abate in the near term. PMI and Industrial output are on revival course with 50.4 and 8.4% touching yearly height.
Chinese economy is expected to grow at 8% in 2013 from 7.7% in 2012. Inflation has reached a healthy 2.2% level in November which raises hope for cut in lending rate triggering growth in construction sector. After the change of guard in November market has been awestruck by optimistic statements by the leaders of growth mixed with stability in the New Year. USD 150 billion infrastructure package announced earlier will start bearing fruit towards Q1 and Q2 with projects hitting execution in full swing.
Demand for steel in China is expected to rise 4.1 percent in 2013, as the nation's economic growth gets back on track, according to a forecast crude steel output in 2013 will reach 746 million tons, up 4.2 percent with the figure for 2012 estimated to be 716 million tons.
Steel prices have improved by 7% during October-November on improved stocking before the Lunar holidays in February Ist week. Ensuing excitement has led to increased steel production by the mills touching nearly 1.9599 million tones per day 1.6% jump from October.
Undoubtedly effervescence in steel production would reflect positively on coking coal consumption giving fillip to the sagging imports off late. China is expected to import nearly 45 million tones of coking coal in 2012 which will go up by another 1.5 million tones in 2013.
However it needs to emphasized the coking coal prices might not see the same flurry as witnessed in 2011 after the flooding of Australian mines when the average price touched USD 289 per tone. The 2012 estimate is USD 210 per ton and 2013 is speculated to be USD 171 per ton. One of the main reasons has been ameliorated coking coal capacity in Mongolia and Mozambique. At the same time US has off late been active in the hitherto Australian bastion owing to dipping demand in Europe.
2013 promises to be summation with increased demand being met by potential capacities thereby culmination in zero sum although the miners will be busy as kilns will be burning.
