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Shorter met coal contracts offer flexibility, analyst says

Keywords: Tags  Wood Mackenzie, Jim Truman, metallurgical coal, Steel First, Stacy Irish

PITTSBURGH — It makes "more sense" to have shorter pricing terms for metallurgical coal, according to Jim Truman, principal analyst at consultant Wood Mackenzie Ltd.

Metallurgical coal contract prices are currently priced on a quarterly basis, which avoids the volatility associated with spot-market pricing. Shorter-term contracts would give metallurgical coal producers the flexibility to adjust prices to reflect consumer demand and input costs, Truman said at the 16th annual Smithers Apex Met Coke World Summit in Pittsburgh.

The Edinburgh, Scotland-based consultancy expects metallurgical coal prices to improve over the long term.

"GDP (gross domestic product) growth in China and India is expected to remain very strong through to 2030. China’s GDP is expected to grow 5.7 percent (annually), while Indian GDP will grow by 6.8 percent year on year," he said. "It will drive the increase in crude steel and demand for met coal. India and China will dominate the seaborne coal market through to 2030."

Wood Mackenzie believes the long-term outlook for the metallurgical coal market is "robust, given strong GDP," Truman said. "Output is expected to grow by 150 million tons by 2030."

A version of this article was first published by AMM sister publication Steel First.

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