We attended the Coaltrans China conference in Beijing this Mon and Tue. This is China's largest international coal conference.
Tuesday's topics include coking coal, transportation, investment in Mongolia and Australia.
In the near-term, speakers all agree on a weak outlook for the steel sector and thus coking coal prices would remain at current levels for a while. Upside is limited due to weak demand while downside is also limited as the small mine closure has bigger impact on coking coal than on thermal. In the long-run coking coal is still regarded as a scarce commodity with tight supply and good-quality resource will be difficult to find.
Many Chinese coal companies have expressed their intention to look for opportunities overseas. Judging from the current experiences in Mongolia and Australia, it seems that big challenges lie ahead, especially infrastructure.
Sinosteel
Coking coal price has likely seen its bottom at the end of 08 and should remain at current levels for a while
China imports continue to rise on lower international prices
Non-integrated coking business continue to be squeezed by coal miners (upstream) and steel mills (downstream)
CRU
Int spot now at $130/t, forced cutback due to poor outlook in 09E
Outlook beyond 2010E
Expect market to recover in 2010E
Future demand growth driven by Asia, especially India
China imports to rise and hence Australian exports
PCI rates continue to rise (over 150 by 2013E) and coke rates to decline (less than 420 by 2013E)
Long-run prices to be above historical average on higher new projects costs
Southgobi Sands
On Mongolian coal projects:
Targeted markets: Inner Mongolia and Gansu
Biggest hurdle is infrastructure
The government should have realized the importance of infrastructure, as suggested by the World Bank…
… But it will take years
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