Coking coal closing in on record after China’s ban on Australia imports: Russell


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LAUNCESTON — While the price of iron ore is slumping in Asia, that of coking coal is heading in the opposite direction, driven, ironically, by China’s ban on imports from Australia and supply struggles.

Contracts of coking coal traded in Singapore, and based on the spot price of Australian cargoes, ended at $274 a tonne on Monday, just below the close on Sept. 3 of $274.33, which was the highest price since April 2017.

The contract has surged 170% since the end of last year and is near the all-time closing high of $299.33 a tonne hit in November 2016.


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Australia is the world’s largest exporter of coking coal, the other key raw material for steelmaking besides iron ore, and was a major supplier to China, the world’s biggest steelmaker, prior to Beijing’s unofficial ban on imports. The ban was put in place last year as part of a political dispute with Canberra that is still continuing.

It may seem illogical that Australian coking coal has rallied strongly when it has lost a top customer, but in effect the Australian price is being dragged higher by even higher prices of coking coal from other countries.

China is being forced by its own policies to source coking coal from other producers, and is having to pay a massive premium for the privilege.

The United States is the world’s second-biggest shipper of coking coal, and prices of cargoes loading at the port of Hampton Roads are at record highs, according to assessments by commodity price reporting agency Argus.


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Low volatile metallurgical coal at Hampton Roads ended at $315.05 a tonne on Sept. 3, having exceeded its previous record high of $295.40 from May 2011 on every trading day since Aug. 26, according to Argus data that goes back to mid-2010.

The Hampton Roads price has historically traded at a discount to Australian cargoes, but this was reversed in November last year, and it has traded at a widening premium since then.

The flip to a premium for U.S. coking coal coincided with the full impact of China’s unofficial ban on cargoes from Australia.


There are other factors beyond China’s action against Australia driving the rally in coking coal, chief among them being weather-related supply constraints.


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Global seaborne exports of all grades of coking coal were 21.01 million tonnes in August, down from 21.48 million in July, according to data by commodity consultants Kpler.

August’s exports were also the lowest since February 2019 and also considerably lower than the 23-24 million tonnes a month range clocked from July last year to June this year.

Weather disruptions are behind the lower exports, with both Australia and the United States seeing delays in loading in recent weeks amid storms.

Australia exported 12.73 million tonnes of all grades of coking coal in August, slightly higher than July’s 12.01 million, but well below the 14.77 million from June and May’s 13.77 million, according to Kpler.

The United States shipped out 3.12 million tonnes in August, up slightly from July’s 2.97 million, but a sharp fall from June’s 4.27 million.


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Russia, the third-largest supplier to the seaborne market, exported 2.47 million tonnes in August, down from 3.18 million in July and in line with June’s 2.48 million.

It is likely that exports from Australia and the United States will return to more normal levels in coming months, which may ease some of the supply constraints.

But so far China’s policymakers show little sign of changing direction on their ban on Australian coal imports, despite the high cost of the policy.

While China has imposed bans or restrictions on several imports from Australia, including barley, lobsters and wine, it has left alone the biggest of them all, iron ore.

Spot iron ore prices for delivery to north China had reached a record high of $235.55 a tonne on May 12, but have been retreating in recent weeks, dropping to end at $131.75 on Monday.

The rally to the record was driven by both strong Chinese demand and supply issues in the top two exporters, Australia and Brazil.

Both of these factors have eased recently, with Chinese steel output declining in line with government targets, and supply improving from the exporters.

(Editing by Muralikumar Anantharaman)


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