Coal news and updates

Trade Review: Met coal prices to get support in Q1 on China-Australia trade re-opening hopes

The seaborne metallurgical coal market is entering Q1 2023 on a strong note amid growing hopes for easing trade between China and Australia and possibility of wet weather conditions in Queensland.

The benchmark Platts premium low-volatile hard coking coal prices, basis FOB Australia, increased $24/mt, or 9%, quarter-on-quarter to $294.50/mt, while PLV CFR China was up $7/mt or 2%, to $315/mt at the end of Q4.

Meanwhile, wetter than average January to March for eastern Queensland forecast by Australia's Bureau of Meteorology could lead to a third consecutive year of supply disruption from Australia.

China a key swing factor in 2023

The global volume of seaborne met coal spot trades fell 52% year on year to 9.8 million mt in 2022. S&P Global Commodity Insights observed a total of 193 spot transactions for seaborne met coal in the year, comprising premium, second-tier, semi-hard and semisoft coking coal, and pulverized coal injection coal used for steelmaking. This was compared with the 20.6 million mt of spot transactions observed by S&P Global in 2021. Out of all deals reported for 2022, a majority 83% was observed to be premium hard coking coal (PHCC), followed by pulverized coal injection (PCI) coal at 15%. About 90% of the PHCC spot transactions seen were for cargos bound for ex-Chinese markets for 2022.

Some market participants argue that the spot market could be seeing the light at the end of the tunnel, with an improving geopolitical relationship between China and Australia, potentially leading to the return of China for spot Australian coal in 2023. Based on the S&P Global data, up to 80% of the spot market liquidity was observed concluded on CFR China basis across varying grades of met coal prior to the unofficial ban in Q4 2020.

China is close to lifting a more than two-year-old unofficial ban on Australian thermal and coking coal imports for its power and steel plants, as the country looks to expand its procurement origins and reduce trade flow disruptions following the Russia-Ukraine war, several market sources in China, Singapore and Indonesia told S&P Global earlier this month.