Australian coking coal prices have risen by $40/t in a month to $286/t FOB in the last week of December. Prices have edged up in the wake of positive news around revival of bilateral coal trade between China and Australia.
China had imposed an unofficial ban on coal imports from Australia in the latter half of 2020 as tensions escalated between the two countries over a series of issues. China had been one of the key importers of coal from Australia in the past.
However, after the new government was elected in Australia in May this year and with the Australian foreign minister’s recent visit to Beijing to participate in the sixth Australia-China Foreign and Strategic Dialogue with her Chinese counterpart, once again hopes have been sparked of the two countries resolving their differences and restarting bilateral trade.
This has had a positive impact on the Australian coking coal market as Canberra contributed around 25% of China’s coking coal imports till 2020. Market participants are anticipating that demand for Australian coal may go up from China pushing up prices.
Global demand sluggish
While the price rise is highly believed to driven by sentiments, coking coal demand from steel mills globally continues to remain dull amid the ongoing holiday season in Europe and the US and Indian mills sufficiently stocked up.
Also, rising covid cases in China has once again slowed industrial activities and any pick up in actual demand seems unlikely.
Outlook
Starting January, demand from the global market is expected to pick up slightly, which may provide support to coking coal prices. POSCO, South Korea’s largest steel mill which had stopped operations due to natural calamity, has resumed operations and demand may rise in the coming days. But everything will depend on rising Covid cases in different countries like the US., Brazil, Japan, and South Korea, which may impact steel demand and coking coal consumption.
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