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Steel demand and weather in Australia will affect coking coal prices

Mining industry

Exports of Australian hard coking coal in January-September this year amounted to 79 million tons, which is 6% less than a year earlier. Exports of PCI and semi-soft coking coal amounted to 39 million tons, down 6% from last year. Australian exports of coking coal may decline for the fourth year in a row.

Steel demand and weather in Australia will affect coking coal prices

Restocking demand, Australian weather and a recovery in global steel demand are likely to weigh on offshore coking coal prices in the Asia Pacific region in the coming weeks after the spot market plunged below $250/t in November Free on board in Australia.

The price of premium low volatility hard coking coal in Australia has fallen by more than $64/t, or 21%, from the start of the month to $247.45/t (FOB) November 30th. The drop was driven by factors similar to those seen in July, when the index dropped $105 per ton, or 35% on the month.

Demand fell heavily last month as steel mills cut production due to low profitability. Spot availability has also improved with more end users reselling their long-term cargo.

The falling supply level on the Globalcoal screen has also heightened buyers' expectations for further price cuts. Most end users didn't want to take the risk of buying spot cargo because they had enough inventory. Weak demand was also underlined by offers of pulverized coal injection (PCI) from end-users in the spot market.

The only place with growing demand for steel is India. The construction and automotive sectors are doing well, but this alone cannot change the entire market dynamics. We will need the support of China and Europe. However, market fundamentals in India were not as strong as expected, despite the improvement in sentiment after the removal of export duties on steel products.

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