Global coking coal prices fall amid oversupply

In August, the global coking coal market was characterized by weak demand in key regions and oversupply, with periodic revival amid purchases of certain batches of this raw material or its resale, and fluctuations in futures on the Dalian Commodity Exchange. This trend continued in September.

In early August, Australian coking coal rose slightly in price amid increased interest in buying. However, traders predicted that the price had already bottomed out (FOB Australia was quoted at $216/t) and would remain low unless there were supply disruptions.

In the Chinese market, both buyers and sellers took a reserved stance at the beginning of the month due to another round of coke price declines, a reversal in futures on the Dalian Commodity Exchange, and an increase in coal supply from local mines.

The market for imported raw materials also supported the negative dynamics – at the end of August, prices for premium Australian coking coal (PLV HCC) fell below $200/t for the first time in two years, Wood Mackenzie noted.

As always, China’s strong influence shaped trends in prices and consumption. Coke production in the country in the first 8 months of this year decreased by 0.4% y/y – to 324.78 million tons. In August, these volumes amounted to 40.89 million tons, down 2.1% year-on-year and 1.6% compared to July.

At the same time, in August, India abandoned its plan to create a consortium of state-owned companies to jointly negotiate coking coal imports, which was discussed earlier this year. The reason was disagreements between steel mills over the required grades of raw materials. In addition, some steelmakers expressed concern that they would lose discounts on their long-term contracts if they negotiated through a consortium.

According to S&P Global, Australian coking coal prices (FOB Australia) fell by 7.2% – to $180/t in two weeks, September 4-18. Prices for this raw material in China (CFR China) fell by 4.8% – to $196/t during the same period.

In mid-September, the Asian coking coal market revived somewhat, with prices rising amid increased trade: in India, steelmakers were building up stocks in anticipation of rising domestic demand, and in China, factories were stockpiling raw materials ahead of the upcoming Golden Week (October holidays, a traditional period of long weekends). However, traders did not forecast strong growth, pointing out that demand in the Chinese market remained weak and there was still an oversupply.

At the end of last week, Chinese coke producers raised their supply for the first time after a series of eight consecutive cuts that had been in place since the end of July. According to BigMint, some steel mills in northern China have agreed to a $50-55/t price increase. However, key enterprises in Hebei and Shandong provinces have not yet made official statements on this issue.

After the first round of coke price increases in China, market sentiment improved slightly, and prices for Australian coking coal began to rise (up to $187/t FOB Australia).

“In the medium term, coking coal prices will be under pressure from the green transition, which, on the one hand, will cause pessimism and caution among market players, and, on the other hand, will create additional opportunities for coke and coking coal producers from Indonesia and Colombia,” comments Stanislav Zinchenko, CEO of GMK Center.