Metallurgical coal producers have moved to shorter-term spot
pricing as a way to manage volatile prices, according to a top
executive at Xcoal Energy & Resources LLC.
"In an oversupplied
market, less than 10 percent of the seaborne-traded coking coal
is priced at a headline benchmark price," Ernie Thrasher, chief
executive officer and chief marketing officer of the Latrobe,
Pa.-based company, said June 21 at the IHS McCloskey Coal USA
conference in New York.
Steel producers have
to remain competitive when buying their raw materials if they
want to survive in an industry that has been plagued by global
overcapacity, weak demand and thinning profit margins.
"No one wants
longer-term pricing for coal, even quarterly pricing is long
term," Thrasher said, highlighting the need to come up with a
pricing structure that would help manage price volatility.
supportive of leading coking coal indices, which he said
"distorts the market" that is thinly traded.
It was suggested that
the industry could move back to annual or quarterly pricing,
but delegates viewed this as unlikely.
"The market is more
focused on spot prices. Its doubtful that people will be
willing to go for longer-term contracts and take a bet on the
market," Thrasher said.
The metallurgical coal
export market has softened due to high stocks and lackluster
demand from major steel producers in Europe and Asia, who have
slowed their overseas purchases to consume existing
"I dont think
people will be willing to take the hit with annual contracts.
Steel producers will say I have to survive today; I
cant wait a year for raw material costs to change.
The tolerance to accept annual coking coal prices has gone," he
Contributing to the
volatility of the market is China, where coal traders and steel
producers use social media to share pricing deals, resulting in
sometimes hourly changes in spot coking coal import prices, one
A version of this
article was first published by AMM sister publication Steel