Coal news and updates

The last time the world saw such a spike in coal prices was during the boom time more than four years ago.

 

No boom is in sight, yet both thermal and metallurgical coal prices have been soaring for the last three months. Supply shortages appear to be the proximate cause.

 

Price variation

According to India Coal Market Watch (ICMW), from July 1, the most popular variety of Indonesian thermal coal (4,200 Kcal) has turned pricier by nearly 38 per cent at $40 a tonne. South Africa (6,000 kcal) thermal coal price is up 48 per cent at $83/tonne.

 

Power plants along India’s coast use the first variety and cement kilns, the second.

 

But the big surprise has been in coking, or metallurgical, coal used by steel-makers. From July 1, Australian coking coal prices have shot up two-and-half 5 times to $230 a tonne, surprisingly at a time when the world steel industry is passing through one of the worst phases with China cutting down 100 million tonnes capacity.

 

According to ICMW, Indian steel plants have booked coking coal for the October-December quarter at $200 a tonne, as against $93/tonne in the July-September quarter. Though India is world’s fourth largest coal producer, it has very limited coking coal reserves.

 

Supply constraint

According to Deepak Kannan, Managing Editor (Asia Thermal Coal) of Platts, the primary driver of this spike is China, which is world’s leading producer and consumer of both thermal and coking coal.

 

Earlier this year, Beijing decided to cut the annual working days in mines to 270 days from 330. This had no significant impact on global prices till June as India stepped up production significantly and cut imports.

 

India is still flush with coal and there has been no supply disruptions from Indonesia, yet thermal coal prices started to skyrocket from July on Chinese buying and supply disruptions in Australia and South Africa. At least two major Australian miners recently declared force majeure.

 

Outlook

But the surge in thermal coal prices may not last.

 

First, in September, Beijing ordered its new mines to step up production . This will increase China’s domestic supplies by nearly 30 million tonnes a month from November. Also, China completed the winter booking and has a 12-million-tonne stockpile at ports that is sufficient for 20 days. Kannan expects pressure to build on thermal coal prices from next month.

 

The outlook is not so clear for coking coal, though. Edwin Yeo, Managing Editor (Steel Raw Materials) of Platts, doesn’t foresee a meltdown in the short term.

 

According to him, the coking coal shortage is acute and some steel-makers in China have had to shut down their blast furnaces. Steel-makers avoid this as re-igniting furnaces is a costly exercise.

 

Yeo doesn’t agree. but some sources see a shadow of cartelisation in coking coal price surge, as three top producers control more than half the global trade.

SOurce:THe Hindu BusinessLine