The premium hard coking coal price will continue to rise to $90/mt FOB Australia in the third quarter of 2016, marking a second consecutive quarterly increase, on stronger steel prices and margins, according to Commonwealth Bank (CBA).

The forecast comes at the back of China’s stimulus-led recovery, continuing to drive steel prices until measures are lifted.

China will continue to provide support for its commodity intensive sector until June or July supporting end-user steel demand, CBA associate director Vivek Dhar wrote in a report released on April 26.

CBA anticipates surplus conditions to return to the seaborne coking coal market in the second half of the year, pressuring Q4 2016 prices to $85/mt, according to Dhar.

As stimulus measures wind down, China’s fall in steel consumption should translate into weaker crude steel output and declining coking coal and coke demand which will pressure met coal prices downwards, he said.

CBA’s forecast for a decrease in China’s coking coal imports, an important driver of met coal prices, in second half of 2016 comes at the back of improved coal railway infrastructure, increased domestic met coal output and “increased scrutiny on the specification of coal imports on environmental grounds.”

As a result of the Chinese central government’s push to encourage exports of its heavy industry, China’s met coal imports have declined by 23% in 2015 to 48 million mt and coking coal output has been increasing in the last few years, the report said.

With dwindling Chinese imports, India has surpassed China to become the second largest coking coal importer in 2015 with a market share of 20% and met coal imports of 57.6 million mt.

CBA believes India, heavily dependent on met coal imports, could be the catalyst for met coal price recovery if its imports continue to rise. However, the view is conditional on India’s steel sector continuing to ramp up and China’s met coal imports not falling again this year.

Meanwhile, Anglo American is looking to dispose its coking coal division – a bearish signal for the met coal market, CBA said. The producer could put the mines under maintenance if it fails to find a buyer, “which would suggest that we are close to a floor in prices,” the report said.

Premium hard coking coal price is to fall to average $83/mt FOB Australia in calendar 2017 in anticipation of dim Chinese steel outlook in the long term, CBA forecasts.