Australian coking coal prices fell by 30% in a month as the premium HCC grade is currently assessed at $376/t FOB Australia, against $530/t FOB seen around the same time last month.
In the US coking coal market, prices fell by up to 20% m-o-m to $371/t FOB basis.
This fall in prices can be attributed to sluggish global steel demand. Indian mills have taken a backseat, post-the Indian government’s decision to impose an export duty on steel. Demand in Europe has also been tepid amid replenished stocks post-the Russia-Ukraine crisis.
India
India contributes 40-45% to Australia’s coking coal exports and an imposition of duties on steel exports had further impacted demand for this fuel.
Meanwhile, China-origin met coke was available at $580-600/t CNF India which was around 20% cheaper than the domestic material, making Indian steel units opt for the former.
Meanwhile, Indian steel mills are also buying coking coal from Russia comparatively cheaper.
As per CoalMint’s data, 0.17 mn t of coking coal arrived at Indian ports in June’22 (1-19 June) against 0.13 mn t combined in Apr- May’22.
Europe
Coking coal demand from the European Union (EU), that had rapidly increased post-the Russia-Ukraine conflict, has turned quite sluggish since the past month.
Steel prices in the EU have witnessed the most sustained fall so far, despite production constraints in the region due to cost pressures. Many steelmakers have curtailed output. The Russia-Ukraine war has resulted in a sharp rise in the prices of energy products, including crude oil, natural gas and coal.
Because steel-making is energy-intensive, production costs have been rising. Worse, supply chain challenges have emerged alongside rising energy costs, which have curtailed output overall in the manufacturing sector.
China
China’s steel demand has been limited in May because of the Covid-induced lockdown, impacting coking coal demand from the US, its key coking coal supplier. While it was expected that demand will pick up post-easing of lockdown restrictions in June, this did not happen. This is because of sluggish domestic consumption and a slowdown in property construction which, in turn, has badly hit market sentiments and also intensified the steel supply glut. As a result, China’s domestic hot rolled coil prices, an indicator of the flat steel market and mainly targeting the manufacturing sector, fell 13% or RMB 610/tonne ($91/mt), from the start of June to RMB 4,270/t on 20 June.
In addition to this, the country’s steel mills are heard to be procuring cheaper Russian and Mongolian coking coal to meet their requirements, thus resulting in bearish sentiments in the global coking coal market.
Outlook
In the near term, steel demand from India, Europe and China is expected to remain sluggish amid onset of the rainy season in Asian countries, unaffordable raw material prices, changed trade dynamics amid the Russia-Ukraine crisis and global supply chain woes. This is further likely to bring down coking coal prices from their unreasonable highs seen earlier this year.
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