Coking Coal $350/mt /If You Invest in Coal You Should Read This !
platts.com
Coking coal prices top $350/mt as steel demand, supply uncertainty hits market
Platts latest Q3-2008 coking coal price assessments showed spot values gaining across the board for all varieties, compared to the previous quarter on the back of several record benchmark term contract agreements and continued tightness in the global metallurgical coal market.
Spot coking coal prices have increased every quarter in the past year.Premium low-volatile hard coking coals from Queensland (See chart: Australia Queensland Coking Coal) and North America (See chart: Us Hamptons Road Coking Coal) were assessed at $350/mt and around $320/mt respectively for July to September, up from $320/mt and $285/mt in April to June.
Spot prices have moved up from the $300/mt April settlement between BHP Billiton Mitsubishi Alliance (BMA), the world's largest coking coal exporter, and Japanese steel mills for premium hard coking coals supplied under term contracts during the year started April 1.
Xstrata is said to have recently sold its Oaky Creek coal into Brazil and Europe for as much as $375/mt, the same price it is seeking under term contract negotiations that have yet to be finalized, according to several sources.
Xstrata said July 8 it couldn't confirm the company had settled hard coking term contract prices for the current fiscal year at $360/mt, as stated in a report.
Spot coking coal prices have increased every quarter in the past year (Dowloand podcast: Third quarter coking coal spot prices hit historic highs), as economic growth in Asia, Eastern Europe and Latin America requires more steel bars and sheets for use in construction, consumer appliances and automobiles, spurning demand for additional raw materials to meet the higher output from steelmakers.
The latest International Iron and Steel Institute figures from June 20 show world steel production up 5.8% year-on-year in May to 119.5 million mt, indicating strong demand and supporting coking coal and coke prices. Steelmakers have successfully raised product prices to maintain profit margins as they contend with the surge in iron ore and coking costs.
"The steel market being in excellent condition eases the way for raw materials to go along with it," said a source.
Hard coking coals from North America and Australia were assessed by Platts at around $100/mt in April to June 2007 and rose to $172.50/mt for Australian material in the January to March quarter of 2009 before surging past $300/mt as floods in Queensland curbed production.
The effect of the floods from January continued to disrupt production from the Bowen Basin, the world's biggest source of export metallurgical coal. BMA's operations as of June 24 were at 90% capacity and total production in the 2008 financial year is expected to drop by more than a tenth from a year earlier to about 50 million mt, BHP said.
Infrastructure constraints are also straining supply. The largest coal port in Queensland, Dalrymple Bay Coal Terminal, in May announced works to expand capacity to 85 million mt/year had been delayed by three months to the end of March 2009 because of bad weather.
North American producers are exporting more to cover the shortfall from Australia, with US seaborne exports estimated to grow 38% to 40 million mt in 2008 compared to a year earlier, according to AME Mineral Economics data.
Mining and infrastructure constraints may limit further export growth for the US, which also has a higher average cost of production than mines in Queensland, according to industry sources.
platts.com
Next page: US coal now "a base blend component"
US coal now "a base blend component"
The US has become a "savior of the met market over the course of the last number of months. US coal is now a base blend component in markets where it has been strictly a swing supplier in the past," said an American source.
Citigroup expects a supply deficit in the coking coal import/export market of 3.5 million mt in 2008.Several sources said North American producers are now reluctant to contract supplies for a year, offering steelmakers at best term contracts running to the end of the year and typically contracts for three months supply.
Volumes offered are also being cut, leading to greater uncertainty in coal procurement and a greater reliance on the spot market this fiscal year, a source said.
Citigroup expects a supply deficit in the coking coal import/export market of 3.5 million mt in 2008, 2 million mt in 2009 and 10.6 million mt in 2010.
The shortfall from exporters led by Australia, the US and Canada, will remain past 2014, the bank estimated in a July 7 report.
As a result of the expected lingering supply deficit and continued strong demand for steel, Citi raised its estimates for coking coal prices, expecting them to stay above $300/mt until 2012 (Dowloand podcast: Third quarter coking coal spot prices hit historic highs).
Pulverised coal injection material from Australia was assessed at $250/mt in the third quarter, surging from $177.50/mt in the previous period, close to reported term contract prices agreed during the April to June quarter.
Strong spot coke prices have increased the value of substitute PCI material, which can be directly fed into the blast furnace in limited quantities. PCI from Indonesia, South Africa, Colombia and Venezuela, which have smaller quantities available on the spot market, was assessed slightly lower.
Semi-soft coking prices also gained in the third quarter to be assessed at around $230/mt for Australian material, up from $195/mt in the second quarter, similar to prices understood to be currently under negotiation for FY 2008 term contracts.
Semi-soft material has a higher volatile matter than hard coking coal and yields less coke, which explains its cheaper price.
Upward steam coal prices that have hit $200/mt in Newcastle port, New South Wales, more than 50% higher than prices in early April, have contributed to driving up the semi-soft market, sources say.
Some thermal coal can be washed to produce semi-soft coking coal and producers such as Felix Resources are planning to switch more production over to the lucrative semi-soft market.
The premium paid for PCI and semi-soft material over steam coal this year is as much as $70/mt, which compares with a spread of about $10/mt a year earlier and a historic premium of $4/mt for PCI and $2.50/mt for semi-soft coking coal, according to industry data.
The increase can be attributed to demand from steelmakers for alternatives to meet their procurement needs as a result of the lower volumes and higher prices of hard coking coal currently available.
The Q3 prices specified, as assessed by Platts in the article, relate to midpoints of ranges published. |
