14 November 2018
- Short-term supply conditions are bullish. After the recent increase in supply, conditions look to stabilize in both basins. This will likely support prices in the short term. The recent de-stocking trend in the EU, which had previously weighed on prices, looks to reverse. This would be another price positive development. However, we see a further build up in inventory across several key coal consuming countries. This is expected to put a drag on prices.
- We estimate short term demand as bearish. With temporary tighter renewable supply, we are expecting higher fossil fuel utilization in Europe. This would imply higher coal consumption. However, the short-term rise in coal demand in Europe opposes what we observe in the Pacific. Persistent weakness in Chinese coal demand remains in play. This was discussed in detail in the previous report. Slowing demand from other North Asian countries (Japan-S.Korea-Taiwan) completes an otherwise weak Pacific demand picture.
- Macroeconomic conditions are bearish. Weak lending conditions will likely to dampen near term coal demand. The latest global manufacturing data also remains weak, with the latest price action likely a reaction to this broad economic slowdown. Short-term energy intensity remains weak but looks to strengthen going into week 47. On a positive note, we have picked up price positive developments in currency conditions.