Prices for coking coal from the main suppliers Australia and the US rose $25-40/ton amid strong global demand and supply disruptions.
High quality low volatile coal (HCC) prices in Australia hit a record $430/tonne FOB Australia as of 19 Jan'22.
Australia has faced wetter-than-average weather conditions this year, hampering mining activities there. This is combined with labor restrictions due to Covid restrictions affecting coal supply in the country. In fact, the country's leading miner has revised its coking coal production guideline for FY'22 (July 21-Jun'22) to 38-41 million tons (mn tons) compared to its previous target of 39-44 million tons.
On the other hand, there is restocking demand for Australian coking coal ex-Chinese due to strong steel prices, although some companies' margins are affected by higher raw material costs.
The USA coking coal prices up $25/t
US coking coal prices rose an average of $25/tonne due to the shutdown of the Baltimore terminal. Highly volatile A prices in the US were valued at $400/ton as of 19 Jan'22.
Supply restrictions from the country exist for the following reasons:
On January 3, '22, an explosion at the belt transfer facility at the Port of Baltimore's Curtis Bay Terminal hindered loading and unloading operations.
Several miners have declared force majeure on shipments of coking coal from the CSX Curtis Bay Terminal in Baltimore.
Limited scope for rerouting coal to other terminals.
In several parts of the country, the winter storm hampered mining operations.
Indian buyers are looking for spot cargo
The demand for coking coal from India has increased as the October-March period is generally the peak season. Indian steelmakers kept stocks of coking coal until January and returned to the market for restocking.
However, rising coking coal prices are a concern for Indian steelmakers as profit margins are negatively impacted. On the contrary, Indian steelmakers cannot fully pass on the rising raw material costs to end users, which may force them to cut their steel production in the first quarter of CY'22.
Stock request from China
Ahead of the Lunar New Year Holidays, which started on February 1'22, Chinese steelmakers' coking coal purchase interest increased.
Chinese buyers are interested in premium low-sulphur materials amid local shortages, but the main concern is the delay of arrival from key exporting countries USA and Mongolia.
In China, the fourth round of price hikes for coking coal has been offered. Prices have increased by RMB 200/tonne ($32/t), but a response is expected from major steelmakers. Some steelmakers are resisting the fourth round of price increases as it is unsustainable.
To achieve better margins, steelmakers need to increase the use of pulverized coal injection (PCI) to lower their production costs. However, PCI prices are rising as buyers flock to the spot market to secure spot tonnages.
While supply constraints will remain in Australia and the US, demand from Chinese and ex-Chinese markets is expected to remain strong, pushing coking coal prices higher.
Comments
No comment yet.