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Coking coal prices may not have scraped bottom of barrel

September 17: Although global coking coal prices have shown relative stability over the past 5-6 months, they have not scraped the bottom of the barrel yet, said Arti Luniya, Executive Director, Coal Import Group, Steel Authority of India, while speaking at the 8th Indian Coal Markets Conference in Kolkata, organised by mjunction services limited, HIS McCloskey and the Coal Consumers’ Association of India (CCAI).

According to her, there are some very key reasons why prices could further head southwards.

First, there is the China factor. The country is seeing slowing of demand growth and steel prices are weak. There are rising costs and a tight credit scenario and all these factors are resulting in lower demand for coking coal.

Also, domestic coal companies in China are undertaking cost reduction exercises and have seen increased capacities. Thus, China is not looking at the external markets for meeting its bulk requirements.

“In the first half (H1), China imported only 31 mt of coking coal which is 23% lower compared to that in H1 of the previous year,” Luniya said.

Secondly, Mongolian coal is playing an important role. According to some estimates, around 30 mt of it is finding its way into the China market and this quantum is set to grow.

Thirdly, shale gas is making crucial inroads into key markets and offering a viable alternative that is curtailing demand for coal.

Fourth, the US is seeing a lot of crossover coal. The differential in steam and met coal prices have been narrowing. As a result, met coal is moving over into thermal coal territory and being sold likewise.

Last, but not the least, China had a huge reservoir of 64 mt of steel scraps in 2013. By 2017, this cache is expected to increase by over 25 mt.  “So, a huge increase in raw material inputs is available for the secondary steel sector. As a result of which its coal requirements would be considerably reduced in China,” Luniya observed.

In the past, coking coal prices have seen wide fluctuations, swinging from $300-$350 per ton levels to $105-$110 FOB.

At present, hard coking coal from Australia is hovering around $109 per ton while the premium low vol material is pegged at $108 per ton.