Australian Coking Coal Record High with Strong Demand in Korea and Japan

Record prices for top quality Australian hard coking coal were set three times in the past week. The price hit $US430 ($595) a tonne Wednesday, almost four times the price in May. Coal prices have risen unabated with supply chain disruptions. Strong demand in Korea and Japan has fueled the rally over the past seven weeks. The prices were already pressured with Indonesia’s decision to ban coal exports.

Coking Coal

Further pressure on coal prices came from BHP, the world’s biggest coking coal exporter announced they would produce 7 per cent less than expected in the year to June 2022. BHP supply has been hampered by high rainfall in the Queensland coalfields and workforce absentee levels in line with high COVID-19 infection rates.

“Our continuing focus on people and on operational reliability enabled us to achieve near record production in iron ore and to reduce the impacts of adverse weather and COVID-19 related labor constraints in our operations,” BHP’s CEO Mike Henry said in the half-year operational review.

Met coal production guidance for the company’s Queensland Coal operations was reduced to 68 million-72 million mt, from an earlier estimate of 70 million-78 million mt. BHP’s own share of that has been lowered to 38 million-41 million mt from 39 million-44 million mt.

SGX Aus Coking Coal Feb ’22 (U7G22)

429.33s +3.66 (+0.86%) 01/19/22 [SGX]

China Ban

The Australian coal industry became increasingly optimistic that China may relax its ban on Australian coal late last year, when some Australian coal cargoes were allowed to pass through Chinese customs in October.

Coronado Global Resources who have operations in two of the largest and most productive metallurgical coal basins in the world, the Bowen Basin in Queensland, Australia and the Central Appalachian region of the US said China’s ban on Australian coal would persist through this year.

Coronado today said it had not seen any change to the China ban, which was benefitting its mines in the US. China has never officially acknowledged a ban was in place for political reasons, as it would be a violation of World Trading Organization (WTO) rules. China had a record cold winter, a showdown with Australia who are the biggest coal exporter in the world and the CCP trying to implement emission standards.

Indonesia Coal Ban

Indonesia is a bigger exporter of thermal coal than coking coal, as such the export ban has driven higher demand for Australian intermediate quality thermal coal, the closest competitor to Indonesian coals. S&P Global Platts reported that Australian coal with 5500 kilocalories per kilogram hit a two-month high of $138.60 per tonne, excluding the cost of shipping, on January 17. In August 2020 the price was $US38 per tonne. Thermal coal is used mainly by utilities to produce electricity. Glencore has sizable operations in Australia and produces thermal coal and metallurgical coal, which is used to make steel.

“When the Indonesian coal export ban was announced, Australian spot coal prices jumped on stronger demand, primarily as a replacement coal for Indonesian coal. This is despite Indonesian coals predominantly having a lower CV than Australian coals. Spot market fundamentals support higher prices due to the tight spot coal availability in the seaborne market.”

– S&P Global Platts.

Indonesia is expected to relax its coal export ban in February and S&P Global Platts predicted prices for Australian intermediate quality coal would likely ease when Indonesian coal returns to global markets.

ICE Newcastle Coal 9 29 2021

Source: SP Global, Barchart

From The TradersCommunity Research Desk