Metallurgical Coal
Price easing to continue in November amid winter cuts
November 2017
The October spot price for premium low volatile HCC averaged US$182/t FOB Australia, down 11% from September, with prices steadily decreasing over the month, amid muted buying, to end October at around US$179/t.
Prices for semi-soft coking coal followed a similar trajectory, averaging US$115/t for the month, down 9% from September. The spot price for LVPCI was more stable in October, averaging US$121/t, a decline of 3% on month. With December Quarter benchmarks yet to be set for second tier metallurgical coal, it seems an index formula may be adopted akin to that which is currently used for HCC contract sales. If so, continued easing of spot prices is likely to result in a quarter on quarter contract price decline.

In the Atlantic market, the spot price for low-volatile HCC FOB East Coast US averaged US$165/t in October, down 9% from September, as the market reacted to the easing of supply tightness in the Pacific market. Strong growth in steel production globally, combined with solid margins for European steel producers, are keeping Atlantic price movements similar to those of the Pacific market.

Index pricing for premium HCC supply contracts is set to continue for the third quarter running in the December Quarter, after September’s calculation equated to a benchmark price of US$170/t. Index pricing for benchmark contracts was first utilised in the June Quarter during a period of price volatility, with the formula an average of three independent premium hard coking coal spot assessments over the prior three-month period. December Quarter contract prices are expected to be settled in early December.

With minor production recommencing from South32’s Appin mine after a three-month outage, supply tightness is likely to ease throughout November. Combined with decreased buying from China amid the implementation of 2017–18 Winter Air Pollution Plan, prices are expected to continue retracting throughout the month.