Key points:

• In 2014, China’s official economic growth was 7.4%, the slowest annual rate growth since 1990. From a bulk commodity perspective, slowing levels of fixed asset investment across the year impacted demand for steel and energy.
• Based on adjusted World Steel data, global steel production rose by 3.5% in 2014, to total 1.64 billion tonnes. China remained the key contributor to this growth – increasing by 5.6% to 823 million tonnes.
• China’s steel demand is likely to remain weak in 2015 – reflecting the poor conditions in the country’s property sector – and steel exports (which rose sharply in the latter half of 2014) are unlikely to be as supportive, with a range of export incentives wound back.
• After a brief recovery in late December, iron ore prices drifted lower again in January – to the lowest levels since May 2009. Recovery in steel output after the Chinese New Year could provide some short term support, however further growth in low cost supply and comparatively weaker steel demand in 2015 should drive prices gradually lower once again – with prices expected to be around US$67 a tonne by year end.
• Prices for metallurgical coal have remained comparatively stable since March 2014 – trading in a range of around US$5 a tonne. Sustained production cuts are expected to support a modest (but limited) recovery in prices – trending up to US$125 a tonne by the end of the year.
• Spot prices for thermal coal have continued to drift lower. In mid January, prices at the port of Newcastle dropped below US$60 a tonne – the lowest level since June 2007 – before recovering.
• Negotiations for the Japanese financial year contract are likely to be protracted. These contracts typically settle at a premium to prevailing spot prices. For now, our forecast is unchanged at US$72.50 a tonne – however the risks are to the downside.

For details, download the full report.

• Bulk Commodities Update – February 2015 (PDF, 385KB)