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Glencore sees thermal coal supply deficit this year

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World Coal,

A number of thermal coal producers have suggested that the downside on prices may be limited going forward. Speaking at the Bank of America Merrill Lynch Metals and Mining conference in Miami, Australian miner Whitehaven suggested that the growth in seaborne supply should subside going forward.

Focusing on the US market, Peabody pointed out that coal stockpiles at US power plants are low with some utilities down to less than 10 days of supply.

It was Glencore, however, that best captured the more bullish sentiment with the company saying it expected the thermal coal market to move into slight deficit this year, growing to around a 50 million t shortfall in supply by 2016 (Figure 1).

Figure 1. Glencore sees the thermal coal market flipping into deficit this year.
Source: Glencore.

“Australian and Indonesian supply growth [is] expected to be significantly lower in 2014,” the company’s presentation said, as CAPEX has been slashed and projects suspended. Meanwhile, the Swiss mining company expects demand for thermal coal to rise by 3% by 2017, while demand for metallurgical coal is forecast to rise 8% (Figure 2).

Figure 2. Consensus commodity forecasts.
Source: Glencore.

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