UBS on Tuesday adjusted its price forecast for metallurgical coal in 2024, citing current market conditions. The financial services provider lowered its price forecast for hard coking coal (HCC) to $265 per tonne, down from the previous estimate of $286 per tonne. This change reflects recent weakness in the spot market.
Despite the deterioration in near-term price prospects, UBS remains optimistic about the medium- and long-term prospects for metallurgical coal. The company expects a price recovery in the second half of 2024, driven by a stabilization and increase in Chinese steel production, which is expected to benefit from economic stimulus and a normalization of the real estate market. Moreover, an increase in Indian crude steel production after the elections is expected to boost demand.
Supply pressure is also expected to contribute to the price increase. According to data from UBS Evidence Lab, stock normalization in Queensland is necessary after another wet summer, which could limit supply. UBS has increased its medium- and long-term forecasts for premium low-volatility (PLV) HCC by around $25 per tonne. This adjustment reflects expected higher costs, continued demand from India and Southeast Asia and a lack of investment in supply infrastructure. As a result, UBS expects the market to face a shortage from 2025 onwards.
The revision to UBS’s price forecasts comes at a time when the commodities market is closely monitoring shifts in global supply and demand dynamics. The company’s outlook suggests that while near-term challenges persist, supply and demand fundamentals will lead to a tighter market in the coming years.
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