US bank Morgan Stanley lowered its 2015 hard coking coal price forecast by $8/t and warned that a slower-than-expected price recovery puts liquidity-constrained US producers like Walter Energy and Arch Coal at particular risk.
Morgan Stanley forecasts an average hard coking coal price next year of $125/t, down from its prior forecast of $133/t, and lower than the current fourth quarter settlement price of $119/t agreed upon between Australian producers and Japanese steelmakers.
"As a result of a shallower expected met coal price recovery next year, timing risk is intensifying for liquidity-constrained producers," the bank said, naming Walter, Arch and Alpha Natural Resources.
"While evidence points to a bottom for metallurgical coal prices, the recovery will take longer and be weaker than our previous forecasts," the bank said.
The bank estimates that about 25mn t of coking coal output curtailments have been announced so far this year. It cited about 10.5mn t of cutbacks announced in the US, 7.8mn t in Australia and 5mn t in Canada.
It said many of the announced cuts are expected to take effect next year, "as operations wind down and destocking concludes."
The bank said it continues to "expect a rebound" next year in coking coal prices as the supply cuts take effect, Australian capacity growth plateaus and Chinese inventories move lower.
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