China’s domestic thermal coal market faces a 2-3 month short squeeze as a rapidly spreading coronavirus outbreak curtails production more than demand, Noble Resources’ chief coal analyst said on Tuesday.
The new virus, which originated in China, has claimed over 1,800 lives in the country, and caused widespread disruption to domestic manufacturing and global supply chains.
“Supply has been hampered in the short-term even more than demand. This has created a short-squeeze in the market, which is likely to last 2-3 months,” Rodrigo Echeverri, Noble’s head of hard commodities research, told the Coaltrans India conference.He expected Chinese demand for thermal coal – mainly used for electricity generation – to fall by about 180 million tonnes due to the disease, outpaced by a loss of about 200 million tonnes of production.
Still, Echeverri said global demand for seaborne thermal coal is expected to fall marginally in 2020 due to a further decline in demand from Europe and the Americas, and the market is expected to be adequately supplied.Indonesian coal production is expected to increase somewhat, but there was little room for higher exports.
“Going into 2020, we see that market has started to rebalance itself,” Echeverri said.