10 October 2019
- We turn outright bullish on short-term supply conditions. The recent supply growth across both the Atlantic and Pacific basins has slowed which should provide some much needed support to the market. We expect global inventory levels to tighten in the short-term and persist through weeks 42-43. Our Implied EU Days of Consumption (DoC) Index has strengthened due to a combination of lower supply and a seasonal uptick in coal burn.
- Our overall demand view remains bearish. We continue to forecast higher renewable power generation in the short-term (week 41-42) which would imply lower coal burn. Pacific demand remains fairly muted as China returns from holiday, while North-Asian (JKT) demand slows.
- Our short-term macroeconomic view has weakened and is suggesting marginally bearish conditions. As highlighted in our earlier publication, our proprietary FX model turned bearish after weakening persistently for the last 3 weeks. This has been largely driven by a weaker importing currency basket. Short-term credit conditions finally improved and continue to show further upward momentum in the coming weeks. While the latest manufacturing data was mixed and even showed signs of slowing down, it continues to be above the long-term average.#