Imported coking coal prices rise amidst high demand, supply disruption

Coking coal prices from the key suppliers, Australia and the US, have risen by $25-40/tonne (t) w-o-w amidst strong global demand and supply disruptions.

Prices for Australian premium low-volatile hard coking coal (HCC) have hit a record high of $430/t FOB Australia as of 19 Jan'22.

Australia has been facing wetter-than-average weather this year that has hampered the mining operations there. This is coupled with labour constraints due to Covid restrictions, affecting the coal supplies from the country. In fact, the country's major miner has revised its coking coal production guidance for FY'22 (Jul'21-Jun'22) to 38-41 million tonnes (mn t) against the previous target of 39-44 mn t.

On the other hand, even so some companies' margins are being impacted due to high raw material costs, there is restocking demand for Australian coking coal from the ex-China markets due to strong steel prices.

US coking coal prices rise $25/t

US coking coal prices have risen by an average of $25/t due to the Baltimore terminal halt. Prices for US high-volatile A have been assessed at $400/t as of 19 Jan'22.

There are supply constraints from the country due to:

• Explosion at belt transfer facility at Curtis Bay Terminal of Baltimore Port on 3 Jan'22 has hampered the loading-unloading operations.
  
  
• Few miners declared force majeure on coking coal shipments from Baltimore's CSX Curtis Bay Terminal.
  
  
• Limited scope to re-route coal to other terminals.
  
  
• Winter storm in a few parts of the country has hampered the mining operations.
  
  

Indian buyers look for spot cargoes

Coking coal demand from India has picked up as the Oct-Mar period is usually the peak season. Indian steel producers had kept coking coal stock till January and are once again back in the market for restocking.

However, rising coking coal prices are a concern for Indian steel mills as the profit margins are being adversely impacted. On the contrary, Indian steel manufacturers are not able to pass on the increased raw material costs completely to the end-users which may force them to curtail their steel production in the first quarter of CY'22.

Restocking demand from China

There is increased buying interest for coking coal from Chinese steel mills before the Lunar New Year Holidays starting on 1 Feb'22.

Chinese buyers are interested in prime low-sulphur materials amidst its domestic shortage, but the major concern is delayed arrival from the key exporting countries, the US and Mongolia.

In China, the fourth round of price hikes in coking coal has been proposed. Prices have been increased by RMB 200/t ($32/t) but a response from major steel mills is awaited. Some steel mills are resistant to the fourth round of price hikes as it is unsustainable.

For better margins, steel mills have to increase the usage of pulverised coal injection (PCI) to lower the production costs. However, PCI prices are also on the rise as buyers rushed into the spot market to secure spot tonnages.

Outlook

While supply constraints are likely to continue in Australia and the US, demand from the China and ex-China markets is likely to remain strong, pushing up coking coal prices.