SINGAPORE Riding on
China, global coking coal demand is expected to improve in
The seaborne coking coal market
experienced a steep price dive as demand dropped just as supply
caught up following a number of years of project development on
the back of high prices.
Spot prices for premium hard
coking coal plummeted by 38 percent to $140 per tonne f.o.b.
Australia in September from a high of $226.50 per tonne in
Things are looking up for
producers, however, with a mild recovery in demand anticipated,
as Asian countriesespecially Chinaramp up
"The real driver (for coking
coal demand) is going to be Asian countries that want their
infrastructure or construction projects to ramp back up, or
other developing countries that would like to do the same," Roy
Hinkamper, commodity lead for metallurgical coal at KPMG LLP,
told AMM sister publication Steel First. "I
tend to be more optimistic, so I dont anticipate (demand
this year) dropping more. I think at its very worst well
have a flat year, but I think its more likely that
well turn the corner and have an uptick, even if only a
Cliff Smee, senior commodity
analyst at AME Group Inc., expects Europe to witness negative
steel demand growth this year, while the United States will be
stable. "I think everyone looks toward China," he said. "They
are really the driver of the (coking coal) market."
In September, Chinas
National Development and Reform Commission approved 25 rail
projects costing 700 billion yuan ($111 billion) as well as
development and feasibility studies for 13 road projects across
the country, followed in November by approval of further rail
projects worth 49.47 billion yuan ($7.93 billion).
"Were pretty optimistic
that the Chinese stimulus spending will have an impact on
(coking coal) prices, and I think that by the second or third
quarter of this year well see that impact," Smee
In addition, China is expected
to take advantage of the current low prices. "I think with the
prices we have at the moment youll see the Chinese
stepping up and buying more, so their demand should be pretty
healthy," said Chris Drew, analyst at RBC Capital Markets.
Most analysts expect the
benchmark contract price of premium hard coking coal to move
above $170 per tonne f.o.b. Australia from $165 in the first
quarter but remain below $200 per tonne throughout the
Although the demand side of the
equation seems able to help lift coking coal prices, Smee said
that U.S. producers could be the game-changers this year.
"If U.S. producers can make the
economics work (at current coking coal prices) and they
continue exporting close to 50 million tonnes per year of
coking coal, wed see coking coal prices remain depressed
throughout 2013," he said.
A version of this article was first published by AMM sister
publication Steel First.