The Coking coal market has come under the influence of the twin impacts of supply tightness and strong demand, which have lifted the price of the coal variant to significant levels.
The latest import offers of the Premium HCC have risen to around USD 144/MT CFR India, which is higher by around 22% than that in the third week of this month. In a similar trend, the latest import offers of the 64 Mid Vol HCC have also been assessed significantly higher, at around USD 137/MT CFR India, which is higher by around 26% over that in the third week of Aug’16.
Australian suppliers have offered the coal variants at USD 128/MT (Premium HCC) and USD 128/MT (64 Mid Vol HCC) respectively on FoB Australia basis.
The steep price rise is triggered by a spate of supply constraints as well as demand emanating from the Indian and Chinese steel industries.
SUPPLY SCENERIO
In Australia, the key international market, supply has shrinked as several Coking coal mines in the Queensland region have been subjected to production disruptions. Many mines in Australia have already suspended operations or have closed down due to falling profits in the wake of declining Coking coal prices in the beginning of this year. In a recent announcement, Peabody Energy, a major American coal miner, said that it will cut its Coking coal production in Australia by half to 7 MnT/year by 2021.
In China, the domestic Coking coal production has been under pressure. Several highways in the Shanxi region, a major coal producing province, has been undergoing repairs after being damaged by the heavy rainfall during the end of July’16. The torrential rain also had damaged the coal transporting infrastructure in the region. Thus, the coal output from the region has been hampered. As a matter of fact, domestic Coking coal supply in China is inadequate to cater to the demand there, as such, imports are depended upon heavily.
DEMAND SCENERIO
Amid contraction in supply, demand has been rising due to increased consumption by Indian and Chinese steel makers.
Upturn of the construction and manufacturing sectors in China has triggered higher demand for steel, necessitating more imports of the coal variant. During the first half of the current year, 27.02 MnT of Coking coal was imported into China, according to China Customs. The import volume surpassed that in the same period of the last year by 25.7%.
Imposition of the Minimum Import Price (MIP) by the Government of India in Feb this year on imports of a slew of steel products into the country has invigorated the Indian steel industry as demand has shifted towards the domestically produced steel products. Higher steel production in the country has increased Coking coal imports, which are procured predominantly from Australia. Indian steel makers are dependent on Coking coal imports due to the meager production in the country.
Source: SteelMint Research
Apparently, the rising prices of the coal variant will raise the prices of Met coke, a derivative of Coking coal.
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