4 June 2020
- We turned bullish in our latest short-term supply view. Tighter supply flows are seen in the Atlantic basin with key origin countries (i.e. US, Colombia and Russia) registering lower shipments. However, the opposite is seen in the Pacific. As mentioned in our earlier publications, we continue to expect tighter global coal inventory levels. This is expected to persist till week#25. Europe Days of Consumption (DoC) strengthened with the marginally uptick in coal burn.
- Our overall demand view turned bearish. We pickup up lower climate spreads which would in theory discourage coal burn in the short term. While overall Chinese China coal demand improved in the last few weeks, we are picking up renewed weakness of late and this would imply further weakness for prices going forward. North-East Asia demand (JKT) improved albeit marginally as economies began to restart in these key areas.
- We turned outright bullish on overall macroeconomic conditions. Short-term credit conditions continue to improve as indicated in our last publication and we remain optimistic that such developments to persist in the short-term. While the latest manufacturing numbers showed that key coal consuming countries remain in contraction, but this pace has slowed. With the recent weakness the USD, our FX model continues to suggest upside for prices with higher overall purchasing power of importing countries.