26 April 2019
- Short-term supply conditions are now bearish. An increase in supply across both basins should pressure prices. However, net re-stocking efforts have re-emerged in Europe which should help to absorb some available supplies. Additionally, global inventories continue to trend lower which in our view is the result of a pickup of demand (rather than supply). This should go on to support prices.
- We assess short-term demand conditions as bullish. Higher fossil fuel utilization is forecast which implies a higher coal burn. Although short-term demand conditions in China remain lacklustre, we picked up greater short-term demand in North Asia (Japan-South-Korea-Taiwan). This should lift in prices going forward. Our trade weighted Import Arb. Index also shows a better incentive for key coal consuming countries to import, which is a price positive development.
- Macroeconomic conditions are bullish. Tight lending conditions look to finally abate as we picked up some net injections of credit. This should go on to stimulate short-medium term demand. However, our key concern for macro is the strength of the dollar which is reflected in our Currency Impact Index. The index currently shows bearish conditions after five consecutive weeks supportive currency conditions.