The current global coking coal market sentiments are dominated by the Russia-Ukraine war and the subsequent sanctions on Russia.
Against the backdrop of the completely changed trade dynamics, countries are avoiding purchases of coking coal from Russia and looking for alternatives.
On 2 Mar’22, the Australian premium HCC FOB price was at $457/t, up $10/t w-o-w. The US high-vol A HCC prices were up by $20/t w-o-w to $400/t.
The demand-supply gap widens
With the latest developments in the last one week — where the Russia-Ukraine conflict has aggravated — demand for Australian coking coal from the ex-China markets has gone up significantly.
Russia supplies about 30% of EU, Japan, and South Korea’s coking coal requirement. Now, with western sanctions on Russia and its ejection from SWIFT – an international payment system — steel mills in these countries are opting for alternate sources such as Australia and USA, pushing up prices of the material in the process.
India imported about 7% of its coking coal requirements from Russia in 2021. Although this is not a major share, still its impact is being felt by Indian steel manufacturers which procured high-quality Russian coal in the absence of the Australian material.
In addition to this, the European countries are facing huge supply disruptions as vessels movement is restricted in the Black Sea, creating panic in the market.
On the supply side, Australia continues to face heavy rainfall, resulting in flooding in mining areas and temporary closure of the Queensland ports of Brisbane and Newscastle. However, another key port, Hay Point, in northern Queensland, has had limited impact of the flooding. The country is receiving more-than-average rainfall this season due to the La-Nina effect.
Chinese buyers move to the sidelines
Although China has not imposed any sanctions on Russia, coking coal buyers there have turned cautious and are not making any major bookings from the country.
Amidst this, domestic coking coal demand has gone up in China by RMB 400/t in the past two weeks. The country has shifted its focus to buying coking coal from Mongolia and truck movement from the country has increased to 150 per day, which is likely to go up soon to 200 per day.
Outlook
In the near term, the Russia-Ukraine war is the most crucial factor that will decide the trend of coking coal prices in the upcoming days. Even if the conflict is resolved between the two countries, sanctions on Russia are going to affect global coking coal trade dynamics.
Leave a Reply