COKING coal prices are expected to surge through a record $US400/tonne this week

COKING coal prices are expected to surge through a record $US400/tonne this week as exports from Queensland's drenched Bowen Basin slip because stockpiles at mines and ports are running out and full rail capacity is yet to return.

 

Prices for Queensland coking coal jumped $US33/tonne to $US383 last week, up 70 per cent on quarterly contract prices of $US225/tonne, according to the latest Platts assessments quoted by Macquarie. "There is not enough slack in the metallurgical (coking) coal supply chain to cover the losses being incurred," Macquarie analyst Max Layton said. "With this, the seaborne met coal market is being undersupplied week after week, with risks of amplified deficits from rampant Chinese steel output and strengthening La Nina conditions still present."

Energy Publishing's Queensland coking coal index has risen to $US365/tonne, from $US332 a week earlier.
"Industry consensus is the asking price of coking coal will effortlessly soar past $US400/tonne by this time next week," Energy Publishing said in its Coking Coal Index report, issued on Friday. Although rain and flooding have eased, and deliveries from mines to ports are resuming, rail capacity is still reduced.

Exports have been supported by mines and ports eating into diminishing coal stockpiles, which had been stored in preparation for the wet season. According to Macquarie, there has been a massive drawdown of almost all the available stockpiles in the Queensland coal chain. "This cannot continue forever, and with the current rates of railing to the ports below volumes being exported, we would expect that export volumes for weeks three and four in January would actually be the lowest seen thus far," Mr Layton said.

"We expect to see the spot price for met coal continue to trend upwards in coming weeks." Coking coal prices are tracked by a number of indexes, so there is some dispute about the record spot price, which was reached in the wake of 2008 Queensland rains. According to Wood Mackenzie, prices peaked at between $US350 and $US375/tonne, and Goldman Sachs lists the high at $US400/tonne.

Macquarie estimates about 3.3 million tonnes of coking coal and 1 million tonnes of thermal coal have been lost from Queensland ports because of flooding, representing about $900 million of exports, based on contract coking coal prices and thermal coal prices of about $US120/tonne. Macquarie estimates losses will be between 10 million and 11 million tonnes of coking coal production and between 5 million and 6 million tonnes of thermal coal, and this could mean about $US3.2 billion of exports lost or postponed this quarter.
On Thursday QR National opened the Blackwater coal railway, which goes to the Gladstone port, but it is only operating at part capacity.