Russian steel group Severstal pours cold water on coking coal rally

01 November 2016

Steel and coal mining group Severstal dismissed recent price strength in coking coal as unjustified on Tuesday, and said it expects declines to take hold within two months as future steel earnings face higher coke costs.

The company cited a reduction of working days for coal mines in China under the 276 day policy and supply disruptions in China and Australia as the main drivers of the near tripling in prices.

“These factors do not justify the current coking coal price and therefore a significant decrease in prices is expected in the forthcoming one-to-two months,” Severstal said in a statement. “Higher hard coking coal prices translate into significantly increased costs of steel production which may support steel prices.”

The company’s coking coal production may help offset this trend, despite the worsening impact of an February mining accident in northwest Russia that cut sales of washed coal by 38% to 910,000 mt in the third quarter, from the year earlier period.

Source – Platts