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Coking coal export prices to hold: analysts

Keywords: Tags  USA, coking coal, Australia, Canada, Kuni Chen, David Beard, Andrew Jones

NEW YORK — U.S. coking coal quarterly export prices are expected to hold steady in the fourth quarter as the European financial crisis and competition from increased supplies out of Australia keep a ceiling on export tags, coal sector analysts told AMM sister publication Metal Bulletin.

Coking coal prices were at about $225 per tonne in the third quarter, up from $206 per tonne in the second quarter, and are expected to stay there for the fourth quarter, analysts said.

"I assume benchmark metallurgical coal prices will stay flat at $225 per tonne in the third and fourth quarters," Kuni Chen, managing director for metals, mining and coal analysis with CRT Capital Group LLC, told Metal Bulletin.

"There is some modest downside risk to prices, based on higher supplies out of Australia and slowing global growth trends ... (but) good-quality metallurgical coal in the United States will continue to be in demand. We assume fairly stable steel utilization rates, in the 75 to 80 percent range, in the second half of the year," he said.

David Beard, managing director of coal and shipping research with Iberia Capital Partners, agreed.

"The stock market is very worried about coking coal benchmark pricing declining by the fourth quarter or into 2013, (but) the third-quarter benchmark price of $225 per tonne seems pretty firm at this juncture," he said.

The expectation of steady quarterly export pricing in the fourth quarter comes despite continued uncertainty in Europe. European steel mills that operate blast furnaces have slowed down purchases of U.S. coking coal due to widespread production cuts, fueled by plummeting steel demand from weary consumers who have been taking a wait-and-see approach to buying.

"I would estimate that, in the third quarter, around 16 of the 74 blast furnaces in Europe are either idle or in the process of being idled," said Andrew Jones, a coal analyst at Resource-Net.

European steel mills kept coking coal stocks low in the first half of 2012 to avoid a surplus of material, as was seen in 2009, he said.

Nonetheless, "on coking coal exports, the United States has been doing well in volume terms compared with both Australia and Canada," Jones said. "U.S. met coal exports were up by 21 percent year-on-year in April, compared with just a 2-percent increase for Australia and 7 percent for Canada."

Meanwhile, demand for coking coal from the U.S. domestic market remains good, supported by vibrant demand from the country’s automotive market.

U.S. sales by the top seven carmakers were 6.26 million vehicles in the first six months of the year, up 14.6 percent from nearly 5.47 million units in the corresponding period last year.

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