Thermal coal prices are likely to remain strong during the Northern Hemisphere winter, then come under downward pressure next year with China's imports are likely to sag, Citi analysts said in a note Thursday.
"The impressive price strength this winter is unlikely to last," Citi analysts said.
The 90-day price of FOB Newcastle 6,300 kcal/kg GAR coal has jumped almost 16% to date this year to be assessed Wednesday at $103.20/mt, S&P Global Platts data showed.
The Citi analysts forecast Newcastle 6,300 kcal/kg GAR coal prices to fall to about $80/mt FOB in the fourth quarter of 2018.
Citi said China's government is committed to lowering domestic coal prices from current spot market levels, and to maintaining the price of domestic coal within a narrow range to benefit both producers and utilities.
For domestic 5,500 kcal/kg NAR material, China is looking to maintain a price range of Yuan 500-570/mt FOB Qinhuangdao basis.
Platts Wednesday assessed the price of FOB Qinhuangdao 5,500 kcal/kg NAR coal at Yuan 695/mt, up around 11% since the start of the year.
China's coal imports over January-November were up 8.5% year on year at 248.17 million mt, according to latest customs data. The rise was attributed in part to higher domestic prices.
Citi analysts expect China's thermal coal demand to dip 1% year on year in 2018 and domestic production to rise 2.5% year on year.
RISING EMISSIONS
In a separate note, Citi said global carbon dioxide emissions were expected to rise by around 2% in 2017, with China being the main driver of the increase.
China's emissions grew 3.5% this year from 2016, Citi said, citing the Global Carbon Project's annual report.
"Given that China is just over a quarter of the world's CO2 emissions, that means that close of half of the CO2 emissions came from China alone," Citi said. Half of China's emissions were likely contributed by coal-fired electricity generation, it added.
Increased coal-fired power generation itself will contribute nearly 270 million tonnes of additional CO2 emissions, Citi analysts said, noting that China's coal-fired power generation grew 6.8% year on year in 2017.
However, a likely rise in hydropower generation may arrest the growth in CO2 emissions next year, Citi added.
