India seen as bright spot as China gloom weighs on steel demand
INDIA’S aspirations to become a major steelmaker will help lift metallurgical coal prices and offset concerns about China’s sluggish recovery, an Australian producer has said.
Infrastructure-related stimulus packages in India will drive demand for the blast-furnace fuel, Coronado Global Resources Inc’s chief executive Douglas Thompson said Tuesday (Aug 8). This 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,” he 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.
Metallurgical coal is a black sedimentary rock found within the earth’s crust. It is higher in carbon, typically low in moisture, and is an essential part of the steel-making process.
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Coronado on Tuesday said net income slumped 65 per cent in the six months through June from a year earlier, after second-quarter realised coal prices fell 32 per cent to US$219.50 a ton. The company sees prices above US$235 for the remainder of this year and into the next.
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 that it was bidding for two of BHP Group’s Australian metallurgical coal mines and expects the assets will be sold by the end of the year. Thompson declined to say more about the bidding process, but said that he expected the sale to “attract a strong field”. BLOOMBERG
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