7 June 2019
- We remain bearish regarding short-term supply. Supply continues to increase in the Pacific basin, however we are picking up some early signs of lower supply in the Atlantic. Strong de-stocking in Europe has continued in the last week, which has been pushing out additional supply to the market. Global inventory levels continue to rise. This remains a price negative development.
- Short-term demand appears to have finally picked up and conditions are bullish. Fossil fuel utilization rates are expected to increase going into week 24. This suggests greater coal burn. Chinese coal demand has marginally strengthened, as indicated by our proprietary implied DoC Index (Days of Consumption). Notably, this index had previously been on a steady downtrend for 9 weeks. We also picked up higher short-term demand conditions in North Asia (Japan-South Korea-Taiwan). These conditions should go on to further support prices.
- Short-term macroeconomic conditions are marginally bearish. Although existing lending conditions remain tight, we expect this will ease going forward. The latest manufacturing data suggests the further deterioration of overall macro conditions, which would be negative for coal demand. Our Currency Impact Index suggests further upside to prices due to the strengthening of the currency in key importing countries.