Japanese mills settle Quarterly Coking coal price at 200$

Exclusive

17 October 2016

Seaborne coking coal spot prices surged further this week as short supplies gave buyers no choice but to pick up cargoes at higher levels. The momentum last week was sparked by the fixing of the contract price of $200 per tonne fob Australia for the fourth quarter of 2016 by Japanese steel mills as compared to benchmark price of $92.50 per tonne fob Australia for the September quarter.

A major push to the prices could have come from the force majeure announcement by Anglo American on its German Creek shipments.

Unlike iron ore, coal supplies are in shortage and buyers looking to restock aren’t able to find cargoes. The only respite available for coking coal comes in wake of a statement published by Macquarie which suggests that, “the easing of restrictions on coal miners in China will add some 20-30 million tonnes of supply to the coking coal market in the last three months of 2016”. Whether it happens or not is a million dollar question.

The forecasted price of coking coal for early 2017 indicate levels of $145-155 per ton depending on how soon China comes back into active mining to cover up the shortfall.

China’s average daily steel output was seen slowing down in the last week of September. Member mills of the China Iron & Steel Assn (CISA) produced crude steel at an average rate of 1.7209 million tonne per day (TPD) during the last ten days of September, down 3% from a rate of 1.7742 million TPD over the second ten days of last month.

The main reason for the slowdown is attributed to the high production rates which edged closer to the year’s high around mid-September. CISA member mills were heard to be holding 13.1526 million tonnes of finished steel in their inventories at the month end, down 1.041 million tonnes or 7% from September 20^th, 2016. This could indicate that the mills would come back into production and may look for more coal in the coming months. If China doesn’t relax coal mining, then the prices could further rise until supplies are restored or steel production is cut back.