India seen as bright spot as China's gloom weighs on steel demand

By Sybilla Gross

India’s aspirations to become a major steelmaker will help lift metallurgical coal prices and offset concerns about China’s sluggish recovery, according to an Australian producer. 
 

Infrastructure-related stimulus packages in India will drive demand for the blast-furnace fuel, Coronado Global Resources Inc.’s Chief Executive Officer Douglas Thompson said Tuesday. That comes as the nation prepares for elections next year with a “fair amount of stimulus” likely in the lead up to voting, he said.

“India is, I think, the shining light on the horizon,” Thompson said. That marks a contrast with China, where the impact of recent stimulus measures are struggling to gain traction, he said.

Indian demand for coking coal, while currently weak, is expected to return — and continue expanding — once the country’s monsoon season ends later this year, Coronado said in an earnings statement. The nation is investing more in steel, with the intensified focus on production likely to persist well beyond a bid to win election support, Thompson said.

That would be good news for metallurgical coal producers, which have seen prices more than halve after hitting a record in March 2022. The declines have been driven by broad global economic uncertainty, and concerns over China’s struggling recovery in particular. 

Coronado on Tuesday said net income slumped 65% in the six months through June from a year earlier after second-quarter realized coal prices fell 32% to $219.50 a ton. The company sees prices above $235 for the remainder of 2023 and into 2024. 

Steel is being increasingly seen as a critical ingredient in the green transition, Thompson said, which will help drive an “accelerated supply-demand imbalance.” While the producer doesn’t supply much volume to China, “more stimulus and large stimulus” from policymakers there should help support prices.

“We see buoyancy and steel demand going forward in the short term, but particularly in the long term,” he said.

Coronado earlier this year confirmed it’s bidding for two of BHP Group Ltd.’s Australian metallurgical coal mines and expects the assets will be sold by the end of the year. Thompson declined to give any further details on the bidding process, but said that he expected the sale to “attract a strong field.”