Chinese coking coal market: suppliers hike prices, buyers confused

19.01.2011 12:06 

Chinese consumers of coking coal have had to reduce their purchases in the second half of January, in spite of the fact that they usually restock during this period of the year before national holidays in February. Deals in both domestic and foreign markets have been scarce. The main reason for most Chinese plants to leave the market is skyrocketing prices for the material.

Increase in quotations of coking coal in all the major markets of the world has been prompted by a critical situation in Queensland (Australia), where about 60% of all coking coal mines of the world are located. Repairing of mines and restoring infrastructure after the damage may take from three to five months, which will lead to a notable global shortage of the material, thus affecting its spot and contract prices.

Currently, Australian high-quality hard coking coal (ash — 7%, moisture — 7-9%, sulphur — 0.5%, volatiles — 17-20%) is quoted at $370-375/t C&F Jingtang, though in early January the material was priced at $262-265/t C&F. Semi-soft coking coal (ash — 8%, moisture — 10-11%, sulphur — 0.6%, volatiles — 28-31%) is available at $276/t C&F Huangdao against $205/t C&F in early January. Market operators believe that offers of the material will add another $20-30/t by the end of the month and will keep growing in February, but somewhat more slowly.

US exporters have profited the most from floods in Australia, as desperate Asian consumers have started showing feverish demand for their material. At the moment, US hard coking coal (ash — 6-8%, volatiles — 17-25%, moisture — 8-9%, sulphur — 0.6%) is available to China at $315-325/t C&F Jingtang, against $250-265/t C&F in the fist week of January. In view of the current situation, US coal miners will not stop raising their prices, as competition among Indian, Brazilian, South Korean and Japanese importers, who have no alterative coal sources, is forecast to become stronger in the short term.

Canadian suppliers are also driving their prices up. Their offers of high-quality hard coking coal (ash — 9%, sulphur — 0.5%, volatiles 19-24%) to China have added $55/t on average since early January, reaching $318-323/t C&F Qinhuangdao.

Russian suppliers have increased their quotations of hard coking coal (ash — 9-10%, moisture — 8%, sulphur — 0.7%) to $280-284/t C&F Rizhao, against $249-252/t C&F in early January, but the quantities of Russian material available are extremely small.

The upward trend has been observed in Chinese domestic market too. Prices for hard coking coal in Shanxi, Hebei and Inner Mongolia have reached $283/t EXW (including 17% VAT), while in early January they were quoted at $250/t EXW. Market participants agree that Chinese buyers will focus on local material purchases after the Lunar New Year holidays, which will last from February 3 to February 8. However, in view of high amounts of coking coal required (about 510 mt in 2010) and closure of more than a thousand coal mines in the northern provinces, China will be unable to refrain from imports of the material.