Metallurgical Coal
Price Support to Continue in September
September 2017
The August spot price for premium low volatile HCC averaged US$196/t FOB Australia, up 18% from July, as market tightness persisted throughout the month on the back of restricted Chinese domestic production and continued supply disruptions in Australia. Prices for lower grades of metallurgical coal continued their upward trajectories throughout the month.

The spot price for SSCC rose 19% on month to average US$118/t in August, largely due to the continued impact of widespread industrial action across the key supply region of the Hunter Valley in New South Wales. This is on the back of a 9% month on month rise in July, and saw the spot price for SSCC finish the month above that of LVPCI, a situation which generally occurrs when there is insufficient supply in the market. The spot price for LVPCI averaged US$119/t for August, an increase of 12% on month. With the spot prices for second tier metallurgical coals remaining elevated, the December Quarter benchmark price settlements are expected to be favourable for coal producers.

In the Atlantic market, the spot price for low-volatile HCC FOB East coast US averaged US$177/t in August, an increase of 13% from July, as the market reacted to continued 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 has persisted for the September Quarter, with the formula equating to a benchmark price of US$170/t. Indexation for coal benchmark pricing was utilised for the first time in the June Quarter, with the formula an average of three independent premium hard coking coal spot assessments over the prior three-month period (June–August in this case).

While the prohibition notice at South32’s Appin mine has been lifted, production has yet to recommence and is unlikely to return to peak capacity this year. Combined with China’s increased safety checks and stringent crackdown on unsafe domestic operations, supply volumes continue to be restricted.