MARKET TREND
Demand for Coking Coal has undergone a wane as the major buyers halted their imports due to the escalating spot prices in the prime international market—Australia. As such, spot prices of the Premium HCC have remained stagnant at around USD 232.75/MT FoB Australia during the last seven days.
At the same time, Coking Coal prices in China have stabilized at Yuan 1150-1180/MT as the steel prices in China dipped, and the domestic coal prices are likely to remain stable in the near future.
However, demand for Coking Coal is expected to return to the market in the near future as the steel producers in China—the largest consumer of the coal globally—will resume full-fledged operations after 15Mar’18; that will necessitate constant procurement of the coal in bulk quantities. On 15Mar’18, the curb on the steel production during the winter season mandated by the Chinese government will come to an end, thus to free the steel makers there to operate their plants at higher rates.
Notably, the recent mandate of the Chinese government to cut down 30 MnT of steel production capacity is not going to impact the Coking Coal demand as the operating steel producers there are going to ramp up their production for amassing higher profits. The steel production capacity-cut is being implemented to rationalize demand with supply.
In Australia, the prime Coking Coal supply market, supplies are without major constraints, and the sellers there are waiting for the Chinese steel makers to resume imports. Despite downpour of rains in Australia, mining activity has not been affected severely and production is expected to remain normal, albeit a slight dip.
In India too, the buying appetite is quite strong as steel production has been going on at high rates. And at the same time, demand for steel is also gradually rising. India’s steel industry is not going to be impacted by the recent decision of the US government to impose 25% duty on steel imports in the continent. According to industry experts, the decision of the US government was influenced by the emphasis to increase domestic production. The decision will however not impact Indian steel production as India’s share in the US steel imports is only at around 2.4%, according to the experts. Therefore, there will be no downslide in steel production in India, and hence no reduction in Coking Coal imports in the future.
PRICE TREND
Speculation of Chinese demand getting stronger in the coming days has prevented any downturn in the rates of Coking Coal offers in Australia. The offers have remained steady in the recent past. Subsequent movements in the offers will be dictated by the demand pattern emanating from China.
Offers for the Premium HCC are reported at around USD 232.75/MT FoB Australia, almost at the rates reported in the week last. But, there is an up-drift of around USD 6/MT in the offers for the 64 Mid Vol HCC against the week-ago offers, and that has arisen due to some shortage in the availability. Offers for the 64 Mid Vol HCC is reported at around USD 200.90/MT FoB Australia.
Source: CoalMint Research
On CFR India basis, these offers amount to: USD 246.30/MT and USD 214.45/MT respectively.
Meanwhile, a Canadian Coking Coal offer was heard at around USD 207/MT FoB.
COKING COAL CONTRACT PRICE FOR JAPANESE STEEL MILLS TO GO UP IN MAR-MAY’18
Japanese steel mills will have to shell out higher prices in Coking Coal purchases in the Mar-May’18 quarter as the Coking Coal price index had averaged USD 236.07/MT during the Dec-Feb’18 period, and that was higher by 23% over the average index of USD 191.93/MT during the Sep-Nov’17 period. Tighter supply during the Dec-Feb’18 quarter had led to the rise in the index.
As a matter of fact, Japanese steel makers set the Coking Coal contract prices for the succeeding quarter based on calculations involving the average price index during the preceding quarter.
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