Metallurgical Coal
TC Iris causing jitters but impact likely minimal
April 2018
With the supply surplus anticipated to triple in 2018, AME is forecasting the contract price for premium low-volatile HCC to fall. As supply-demand dynamics remain relatively unchanged moving into 2019, AME forecasts the premium HCC contract price to decline further.

Lower than expected buying from China following February’s New Year holidays caused prices to decrease steadily throughout March, with supply readily available across most grades of metallurgical coal. The formation of Tropical Cyclone Iris off the coast of Queensland, Australia caused port operators North Queensland Bulk Ports to suspend operations at its coal terminals in the region in early April, leading to rail operators Aurizon halting train movement on its Goonyella and Newlands lines. At present, TC Iris is not forecast to make landfall and therefore full port and rail operations are anticipated to recommence by the end of April’s first week.

The March spot price for premium low-volatile HCC averaged around US$217/t FOB Australia, falling 5% on month as prices declined from US$233/t at the beginning of the month to US$197/t at the end amid low buying interest from China. The spread between premium and second tier products continued to narrow in March, with spot prices for low-volatile PCI and semi-soft coking coal averaging US$150/t and US$124/t, down 1% and 4% on month, respectively.

In the Atlantic market, the spot price for low-volatile HCC FOB East Coast US averaged around US$195/t in March, largely flat on month but falling consistently for the duration in response to demand in Asia. Strong growth in steel production globally, combined with solid margins for European steel producers, are continuing to keep Atlantic price movements similar to those of the Pacific market.

JFE Steel has negotiated its June Quarter contracts for low-volatile PCI and semi-soft coking coal at US$155/t and US$136/t FOB Australia, respectively. The settlement price for low-volatile PCI saw a 1% drop quarter on quarter, whereas semi-soft coking coal declined 5% from the March Quarter. Both contract prices, however, remain comfortably above that of the current spot price, at approximately US$7/t for low-volatile PCI and US$19/t for semi-soft coking coal.