• Bulk commodity prices softened in January, driven by the end of the restocking phase and seasonally weak steel production – which contributed to weaker demand trends for coal and iron ore.
• Expanding rail freight capacity in China could impact the country’s demand for seaborne coal – particularly thermal material. This could effect longer term prospects for thermal coal markets – where China has switched from being a major exporter to the world’s largest importer in the space of a decade.
• Global steel production increased by 4.5% in 2013, to 1.6 billion tonnes, with China the key contributor to growth. Excess production capacity in China continues to impact on profitability, with steel prices drifting down in late 2013, despite relatively stable raw material costs.
• Iron ore prices eased slightly in early January, reflecting a period of weak steel production as well as the end of restocking. Increased supply and modest growth in consumption should place downward pressure on prices from the second half of 2014.
• Hard coking coal contracts for the first quarter of 2014 have fallen to US$143 a tonne (down from US$152 in Q4) – the lowest in the (short) history of quarterly coal contracts.
• Softer seasonal demand and adequate stockpiles at ports and electricity generators have contributed to an easing in thermal coal spot prices in early 2014. Relative weakness in spot prices signals likely declines in Japanese financial year contract prices.
• Our commodity price forecasts for iron ore and thermal coal have been left unchanged this month, while the profile of hard and semi-soft coking coal is marginally weaker across the first half of 2014 (reflecting a slightly larger than expected fall in first quarter contract prices).

For further analysis download the full report.

• Bulk Commodities Update – February 2014 (PDF, 173KB)