The deterioration in growth in Euro area is alarming, especially given the low base. Decent growth at the start of the year has evaporated, with the weakness in steel production more apparent than the slowdown in manufacturing PMI data.
This new development is an unwelcome one for an already oversupplied met coal market.
Other key importing countries are showing better signs of growth, but this is hardly stellar. India is showing better signs while activity growth while steel production in Korea has been particularly strong. But momentum has been lost in Japan.
Results from the large diversified miners are trickling in and so far growth in met coal exports in 2Q14 have been strong. BHP has seen first production from Caval Ridge, with total Qld met coal sales up over 1mt from 2Q13. Anglo American has seen shipments rise 10%YoY in the quarter, with Rio Tinto also seeing some gains.
Productivity improvements remains the main game for Australian producers to try and reduce costs against falling prices.
US producers have cut production as prices sink below costs, with exports down ~10% in the YTD. But so far this doesn't appear to be enough given the shifting demand puzzle which hasn't fit together for met coal for the past 18 months.
Downside to prices is probably limited from here and destocking of coke by Chinese steel mills is a positive against the gloom. But market fundamentals look like to continue to misfire for met coal for sometime yet.
