Thermal coal imports to decline 22% yoy in Q2
Integrated steel mills are either reducing their capacity utilisation or suspending their operations in entirety due to supply chain disruption caused by the three-week lockdown since 25 Mar 2020.
The mills, especially with captive raw material supplies, good liquidity and better inventory management, are better placed in the current environment.
Still, due to limited demand, these integrated mills are hit.
“We expect Q2 2020 crude steel production to decline by 19% or 5 million tonnes (Mt) year-on-year (yoy),” Wood Mackenzie principal analyst Sandeep Kalia said on 8 Apr 2020.
“The production of merchant iron ore miners have been struck due to limited workforce, inter and intra state logistic issues and scaling down or suspension of operations by both integrated and secondary steel mills,” he saud,
The current base case is changed to 39 Mt iron ore demand in Q2 2020, down by 16% or 7 Mt yoy.
Overall, the domestic iron ore production is expected to meet the demand from the steel industry.
Domestic metallurgical coal production, which meets 10% of demand, will continue during the country lockdown period as most of it is captive. The greater downside risk is on the import of metallurgical coal, in case of an extended lockdown.
“In our current base case, we expect met coal imports to decline by 2 Mt or 15% in Q2 2020 yoy due to a decline in coke production, in line with a decrease in hot metal production and a slight drop in demand of coke by consumers other than steel mills,” he said.
Thermal coal demand should reduce by 25-30% in April and an overall 8% in Q2, assuming a gradual recovery starting 15 April.
“We forecast thermal coal imports to decline by 10 Mt or 22% yoy in Q2 to a run rate of about 12 Mt per month from a run rate of 15-16 Mt per month witnessed over the last six months,” said principal analyst Pralabh Bhargava.
“In an extended lockdown scenario till mid-May 2020, we expect further downside risk in steel production, iron ore demand, metallurgical and thermal coal imports of 5Mt, 10Mt, 5Mt and 5Mt, respectively, in Q2,” Bhargava said. fiinews.com
