Australian coking coal prices fall by $112/t in Apr’22 as panic buying subsides in EU

Australian premium coking coal prices fell by $112/tonne (t) in April to $478/t against $590/t in March.

• This fall in prices can be attributed to the easing in panic buying from the European market post-sanctions on Russia by many countries triggered by the onset of the Ukraine crisis.
• Improvement in Australia’s wet weather conditions resulted in no disruption in coal mining activities there.

European market scenario

Amid the outbreak of the war in Ukraine, European steel producers had to face disrupted supply lines in March with the imposition of sanctions on Russia.

Russia supplied about 32 million tonnes (mnt) of coking coal to the EU in 2021, marking about 17% of the latter’s requirement. At the onset of the Ukraine conflict, steel mills had sufficient coking coal stock. However, the panic amid uncertainty made buyers purchase more than required quantities in March, making coking coal prices soar.

However, at the start of April, the EU announced its decision to implement the ban on Russian coal imports from August 2022, resulting in an ease in panic buying by the European mills and subsequent correction in prices.

Flooding subsides in Australia

The weather improved in Australia in April and mining operations that had been hampered due to floods returned to normalcy, resulting in increased supplies and easing of prices, informed market participants.

However, CoalMint’s data shows that Australia exported about 10 mnt of coking coal between 1-25 April, 2022 while a few more export vessels were expected in the last five days of the month. Any increase in exports was largely restricted as buying from the key importing destination, India, remained limited amid elevated prices.

Demand from China remains subdued

In China, buying sentiments remained bearish on weaker economic outlook, amid Covid lockdowns. Also, Chinese end-users were heard to be prioritizing procurement of cheaper domestic coking coal. They were reluctant to book imported coking coal because of concerns about the late arrival of cargoes and poor steel margins. Also, in case of imported requirements, Chinese buyers are procuring Russian coal which is being sold at discounted rates.

Outlook

Australian coking coal prices are expected to remain elevated to the levels of $450-500/t amid changed trade dynamics that have made the EU a major buyer of Australian coal. Also, supply constraints from the major miner, Anglo American, continues as the company has postponed longwall move at Moranbah (due to a fatal accident in late-March, 2022) and production was ceased at Grasstree, which may keep the Australian coal prices elevated in the near term.