<strong>coal</strong> market fundamentalsCoking <strong>coal</strong> prices on the declineArnab MallickMetallurgical <strong>coal</strong> prices with the blast furnace(BF) steel producers for the third quarter of thefiscal year 2010 (October-December) have beenfinalised for all types, reflecting worldwide loose supplyposition. It has been for the first time since the turn of thefiscal year 2010 that prices for metallurgical <strong>coal</strong> have beenreduced.As mentioned earlier in Coal Insights, out of these, for hardcoking <strong>coal</strong>, the negotiations between the BF steel producersand BHP Billiton Mitsubishi Alliance (BMA) ended inagreement on August 30.The prices of main brands of hard coking <strong>coal</strong> exported byBMA in the third quarter became $209 per ton fob each for PeakDowns and Saraji <strong>coal</strong>, $205 per ton fob each for Goonyella<strong>coal</strong> and Riverside <strong>coal</strong>, $195 per ton fob for Norwich Park<strong>coal</strong> and $190 per ton fob for Gregory <strong>coal</strong> with price reductionof $16 to $20 per ton for every brand from the second quarter(July-September).At the same time at the end of August, low volatile (LV)PCI <strong>coal</strong> of Russian origin was set at $130 per ton fob withthe reduction of $40 per ton (22.5 percent) from the previousquarter.Furthermore, from end August through early September,the prices of LV PCI <strong>coal</strong> produced in Queensland Australia,have been settled one after another.The market sources said that LV PCI <strong>coal</strong> for the thirdquarter became $147 to $150 per ton fob, down $30 to $33 perton (16.7-18.3 percent) from the level witnessed in the previousquarter.On the other hand, for semi-soft coking <strong>coal</strong>, negotiationswith several independent suppliers ended in agreement andwith these suppliers, the prices for semi-soft coking <strong>coal</strong>loaded at Newcastle were settled at $138 to $140 per ton fob,down $32-$34 per ton (18.6-19.8 percent) from the previousquarter.In contrast, the negotiations with the two <strong>largest</strong>suppliers of semi-soft coking <strong>coal</strong>, Xstrata and Rio Tinto,took longer time and the agreement on semi-soft coking<strong>coal</strong> exported by these suppliers could not be reachedwithin September.In mid-October, however, at long last, the price of semisoftcoking <strong>coal</strong> loaded at Newcastle by Rio Tinto was fixed.The price of semi-soft coking <strong>coal</strong> for the third quarter became$143 per ton fob. This represented a decrease of $29 per ton(around 16.9 percent) from the level reported in the previousquarter.As a result, semi-soft coking <strong>coal</strong> price of Rio Tintobecame higher by $3-$5 per ton as compared with those of theCoke under pressureThings have been getting a bit tough for coke makersacross the world and surely India as, on one hand,prices of steel are failing to cheer up the marketwhereas on the other, relatively higher coking <strong>coal</strong>prices are putting tremendous pressure on margins.Meanwhile, it has been learnt from media sourcesthat Eastern China’s Shandong Coking & ChemicalIndustry Association (SCCIA) lifted its coke referenceprice and was calling on coke producers to keep theiroutput at 30 percent of capacity. According to availablereports, the SCCIA issued a notice on October 31 andraised its reference price for first grade coke to RMB1950 per ton ($293 per ton) from September’s referenceprice of RMB 1850 per ton. The reference price forsecond grade coke also increased by RMB 100 per tonto RMB 1850 per ton.Experts are, however, of the opinion that cokeexports from China are likely to remain low in theforeseeable future and with 40 percent export tax,prices are likely to remain comparatively high.At the same time, supply reduction in China willhopefully keep prices firm. According to marketsources, Chinese <strong>coal</strong> coke market has been remainingfirm as <strong>coal</strong> coke production has been continuouslyreducing and the upward movement of the <strong>coal</strong> cokemarket is due to the increase of metallurgical <strong>coal</strong>price with the commencement of the winter season,resulting in soaring demand for heating. Demand inmetallurgical coke in the Chinese market did not turnupward.Influenced by this movement, export price has beenincreasing. The offer price for export of metallurgical<strong>coal</strong> coke (with ash content of 12.5 percent) seems toincrease to around $450 per ton fob with export taxof 40 percent included during the beginning of themonth.independent suppliers. The price negotiations with the blastfurnace steel producers on Hongay anthracite of Vietnameseorigin for the third quarter of the fiscal year 2010 (October-December) was heard of having been completed during thelast week of October.The contract price for the third quarter of Hongay no.6COAL INSIGHTS 22 November 2010
<strong>coal</strong> market fundamentals<strong>coal</strong> for PCI operation was setat $150 per ton or so, whilethat of the Hongay no.8 <strong>coal</strong>for sintering was set at $143per ton fob or so, with pricereductions of $30 per ton (plusabout 17 percent) for no.6 <strong>coal</strong>and $27 per ton plus (about16 percent) from the first sixmonths of the fiscal year 2010(April-September).In the meantime, spotprice of hard coking <strong>coal</strong>has been trading in line withQ3 contracted price. As peravailable information, spotprice of prime hard coking <strong>coal</strong>has been hovering at around$205-$210 per ton fob Australiaaround November 8 on back ofweak demand from the steelmakers.Things have been slightlybetter and the prices gained around $5 per ton fob Australiain the following week.This was significantly lower than the recent high level of$222-$225 per ton fob duringthe last trading days of October,as per data available with CoalInsights.Similar movement was seenin semi-soft coking <strong>coal</strong> pricewhich has been quoting ataround $180-$190 per ton fobaround November 8 as comparedto $192-$205 per ton fob duringOctober end.A section of analysts are ofthe opinion that steel prices inChina, which have been largelyinfluenced by its monetarypolicy, will significantly impactthe price trend of crucialsteelmaking raw materials.These include coking <strong>coal</strong> andcoke.In the meantime, movingin line with its typical seasonaltrend, domestic coking <strong>coal</strong> pricesin China’s Shanxi province are expected to get steady supportas mill and coke plants have slowly started re-stocking aheadof the winter holidays.COAL INSIGHTS 23 November 2010
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