Metallurgical Coal
Prices to Steady in August After Sharp Decline
August 2019
A decrease in metallurgical coal prices continued in July, which fell to their lowest levels this year. Premium hard coking coal prices fell 8% in July to US$182/t, whilst Low volatile PCI coal dropped to US$113/t. Interestingly, semi-soft coking coal prices remained steady during July at US$90/t, a 0.1% decrease from the previous quarter.

Like the thermal coal market, the metallurgical coal market is also experiencing reduced levels of demand with prices reaching below US$170/t mark—the lowest price recorded since July 2017. The coking coal price has been declining since early July with unseasonably hot weather causing lower demand from East Asia. However, it is expected that the price will recover and stabilise back to the US$180/t level within next two months. While strong steel production from China and India continues, the metallurgical coal price is forecast to remain robust in the medium term.

Despite the downward trend in both thermal and coking coal prices, China’s total coal imports surged 6% on year despite total coal imports in June falling to 27Mt. The lower import volume in June is due to China tightening volumes to slow down imports to meet the 280Mt target. China was 1Mt over the target volume in 2018 with 281Mt of total coal imported. Imports from January – June rose 5.8% year on year to 154Mt.  It is expected that the country will continue to move forward with a target volume of 280Mt in 2019.  Thus, the import restriction and port delays are expected to remain for the rest of the year. However, the impact of the restrictions are less likely to hit the coking coal market as China is expected to prioritise coking coal over thermal coal.

Blackhawk mining in the US has entered a Restructuring Support Agreement with its lenders and has commenced solicitation on a plan of reorganisation. As part of the restructuring, Blackhawk will file a voluntary petition for reorganization under Chapter 11 of the Bankruptcy code. Under the plan, the lenders under Blackhawk’s first and second lien term loans will receive a combination of debt and equity. The transformative transaction will eliminate over 60% of the company’s debt and provide over $150m of incremental liquidity. Blackhawk has advised that there will be no disruption to the company’s employees, customers or vendors.

While global trends of turning back on the coal business continues, the world largest metallurgical coal producing company BHP, continues to push for greater output. For the metallurgical coal division, BHP’s Metallurgical coal production was broadly flat at 42Mt in 2019 financial year. BHP has announced that production of between 41 and 45 Mt is anticipated in the 2020 financial year. At Queensland Coal, record annual production was achieved at BMC due to improved wash plant performance and increased yield at South Walker Creek.