What made Australia’s coking coal prices rise in Jan’23?

Australian coking coal prices have risen by $30/t, compared to the levels seen at the start of the month. The price of the premium grade coking coal is currently assessed at $325/t FoB Haypoint, Australia. The rise has come due to two factors:

• Improving trade relations between China-Australia
• Heavy rainfall in the region that has led to supply disruptions

Coking coal prices have been on a rising trend since December-end amid talks of China and Australia improving their trade relations. On 4 January 2023, China allowed its four companies — three power utilities and a steel mill — to resume coal imports for their own usage. This decision supported the Australian coking coal prices in the first week. However, prices remained stable in the second week as demand from China turned slow ahead of the Chinese New Year holidays.

In the third week, coking coal prices rose once again as heavy rains disrupted supply logistics in the mining areas. Operations at the multi-use Dalrymple Bay Coal Terminal (DBCT) have been interrupted since 11 January owing to heavy rains over North Queensland, as per market sources. DBCT informed customers that train departures on 17 January would be suspended, while all future berthings are delayed until 20 January, logistics sources said.

DBCT and Hay Point are referred to as cargo-assembly ports. This implies that any delays in shipments from the mine to the port, or in arrival of vessels at the port for loading, are difficult to offset.

Australian coking coal shipments fell by 11% to 5.53 mnt from 1-16 January, 2023. Shipments from DBCT fell by 32% to 1.44 mnt for the period. Heavy rains in the region led to supply issues affecting shipments from the port. However, shipments from Hay Point increased marginally to 1.58 mnt for the period.

Outlook

Coking coal prices are likely to rise in the near term as the Bureau of Meteorology Australia (BMA) has forecasted heavy rains in the coking coal region of Queensland. As mentioned above, heavy rains in the region had disrupted supplies and shipments are also expected to be delayed by two weeks due to bad weather.