Japan Metallurgical Coal Imports

DBX believes the metallurgical coal market is constructive, with stronger demand in western countries as well as south and southeast asia. Supply constraints are expected to intensify due to the closure of Anglo American's Grosvenor coking coal mine, which has a capacity of 5 million tonnes per year, following a fire. Consequently, we believe PHCC coal prices should trend towards $275/t FOB Australia as weak supply more than offsets weak demand. However, there are some strong headwinds to the steel demand in the Far East driven by an ailing construction sector plagued by overcapacity in China and high material prices and labor shortages in Japan and Korea.