The quarterly average of Australian coking coal prices rose by 31% ($120/t) and is currently assessed at $299/t, FoB Haypoint. While the prices had touched its low at $190/t FoB in July due to subdued global demand from steel mills, it has increased recently due to supply disruptions.
Dramatic price variation
Coking coal prices that went down during June-July after the war-triggered panic buying settled across the globe, started their ascent from mid-August amid Indian mills’ restocking activities on the expectations of demand revival (with monsoons nearing its end and upcoming festival season). However, in September and October while global steel demand turned sluggish amid inflationary pressure, prices continued their rise due to supply disruptions caused by heavy rains.
For the third-straight-year, Australia is exposed to the La Nina weather phenomenon in the Pacific Ocean, which brings above-average rainfall, flooding the mining regions.
This coupled with Indian Ocean Dipole – a climate phenomenon that affects rainfall patterns near the Indian Ocean, including Australia. However, it turned negative in May, increasing the chances of above-average rainfall for most of Australia in the September-November spring.
Another factor that has pushed up the prices recently is the country’s largest miner, BMA’s (BHP and Mitsubishi Alliance) workers voting for strike amid job insecurity and wage dissatisfaction, leading to drop in its output.
Australian miners’ production affected
Australian major miner, BHP has produced 6.7mnt of coking coal in July-September, down by 19% on the quarter because of the wettest quarter in last 10 years.
Another key miner, Whitehaven’s coal production also dropped by 23% in July-September quarter, whereas run-of-mine coal production dropped to 4 mnt, compared with 5.2 mnt in corresponding quarter of last year. Yancoal’s raw coal production stood at 9.8 mnt in July-September, down 25% y-o-y.
Australian exports fell by 9%
Coking coal exports from Australia fell by 9% q-o-q to 36.69 mnt in July-September 2022 quarter. The global steel demand has turned muted with China dealing with Covid restrictions and property crisis, as a result another major economy started facing inflationary pressure and energy crunch. With export duty on steel in place since May-end, demand from India is also not-so-bearish.
Outlook
Australian coking coal prices are expected to rise in the coming quarter as the nation will encounter wetter season impacting its mining operations and transportation. Due to ongoing rains, expected shipments from ports in Queensland are likely to get delayed by 15-30 days.
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