April 24, 2024 - On Tuesday, UBS adjusted its price forecast for metallurgical coal in 2024, citing current market conditions. The financial services firm reduced its hard coking coal (HCC) price forecast to $265 per tonne, down from the previous estimate of $286 per tonne. This change reflects the recent weakness observed in the spot market.

Despite the reduction in the short-term price outlook, UBS remains optimistic about the medium and long-term prospects for metallurgical coal. The firm anticipates 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 property market. Additionally, a rise in India's crude steel production following elections is projected to bolster demand.

Supply pressures are also anticipated to contribute to the price increase. According to UBS Evidence Lab data, inventory normalization in Queensland is necessary after another wet summer, which could constrain supply. UBS has raised its medium and long-term forecasts for premium low-volatility (PLV) HCC by approximately $25 per tonne. This adjustment reflects anticipated higher costs, sustained demand from India and Southeast Asia, and a lack of investment in supply infrastructure. As a result, UBS expects the market to face a deficit starting from 2025.

The revision in UBS's price forecast comes at a time when the commodities market is closely watching shifts in global demand and supply dynamics. The firm's outlook suggests that while near-term challenges persist, the fundamental drivers of demand and supply will lead to a tighter market in the coming years.