24 May 2019
- Short-term supply conditions are outright bearish. Supply has increased across both basins and is appearing at a time of lower demand. This is expected to apply further downward pressure on prices. With a net de-stocking trend in Europe, this should also inject additional supply into the market. Global inventory levels continue to rise and are forecast to increase further. This is again a price negative development.
- We assess short-term demand conditions as overwhelmingly bearish. Fossil fuel utilization rates are expected to weaken into week#22, this should imply weaker coal burn. Chinese coal demand has continued to decline as our proprietary implied DoC (Days of Consumption) indicator increases. This weakness is reinforced by weaker short-term demand conditions in North Asia (Japan-South Korea-Taiwan).
- Macroeconomic conditions remain bullish. We continue to pick up supportive credit conditions, along with improving energy intensity which should provide some support to prices. We expect new manufacturing data next week which should provide further guidance on whether the current manufacturing conditions will gain further momentum. Dollar strength remains a key concern as our currency impact index continues to suggest downside to prices in the short term.