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Despite recent bullish indications, met coal prices are expected to remain on the low end moving forward given the weak global steel industry, analysts said.

 “Steelmakers will continue to struggle into 2021, especially in the high-demand Asia-Pacific met coal market, as headwinds hold back profitability for steelmakers despite some recovery in production” Moodys Investor Services said in a report Sept. 29.

However, an insufficient supply response would undercut the higher met coal prices expected in 2021, leaving the path to recovery uncertain.

Additionally, consolidation in the steel market will make it more difficult for US met producers, the Benchmark Company said in a report Oct. 1.

“With the North American blast furnace steel industry consolidating to only a few players, the competition for domestic fixed-price business is likely to get even more fierce in the years ahead,” Benchmark continued.

Benchmark was bullish in its met market expectations following a 26% rebound in met coal prices over the last month.

Platts Analytics was on the bullish side, as well, for met coal prices, noting stronger industrial and steel production over the next year which should continue to support met demand and aid US exports in a report published Oct. 2.

Increased restocking from India, Europe and Brazil along with the end of CY2020 quotas in China and a wetter-than-normal rainy season in Australia include some of Benchmark’s bullish factors.

“There is another potential albeit less easy to forecast catalyst lurking: an easing of Chinese import quotas in early 4Q,” Benchmark said. “Why might that happen? Believe it or not, it has less to do with met coal and more to do with utility coal.”

With Chinese utility coal prices at near two-year highs, outside the government’s comfort zone, there is speculation the Chinese government may become less restrictive on coal imports in October in order to ease price concerns.

“The question, though, is will met coal get lumped in with thermal coal, or will it be treated separately? To be clear, we aren’t sure anything will happen at all, but it’s worth watching,” Benchmark said.

The arbitrage for met coal favors imports into Chine by $32/mt, Benchmark said.

On the US export side, through July, the most recent available data US Census export data, met exports totaled 22.1 million mt, down 25.2% compared to the year-ago period, while total US thermal exports have declined 25.5% year on year.

According to Moody’s, US met producers are losing their market share in the export market, leaving prices to remain soft for 2020-21 exports.

“At the commodity prices that we anticipate, we expect that met coal export volumes will fall to 30 million st-35 million st in 2020, down from 55 million st in 2019,’ Moody’s said.