LAUNCESTON, AUSTRALIA – (Reuters) – – Coking coal prices are yet to show signs of bottoming with bearish signals from both contract talks between Australian producers and Japanese buyers as well as Chinese demand.
Hard coking coal for second quarter delivery was settled at $109.50 a tonne free-on-board between producer BHP Billiton and buyer Nippon Steel, Morgan Stanley said in a research noted on April 6.
This was down 6 percent from the previous quarter’s contract and represented a 7 percent premium to the spot price at the time the deal was concluded. The premium to the spot price is in line with prior settlements, with Japanese buyers willing to pay above spot in order to guarantee supplies.
Coking coal, also known as metallurgical coal, is used in steel-making and is traditionally a higher value product than thermal coal used in power generation because it has a higher energy value and fewer impurities.
However, coking coal prices are now down two-thirds from their peak around $300 a tonne in 2011, while benchmark thermal coal prices at Australia’s Newcastle Port have dropped about 55 percent over the same period.
Similar to thermal coal, coking coal has suffered from oversupply as global miners responded to the view that Chinese demand would accelerate for years to come.
This view has been challenged by recent events, with China’s imports of both coking and thermal coal slowing significantly.
Coking coal imports totalled 62.3 million tonnes in 2014, down 17.3 percent over 2013, according to Chinese customs data. In the first two months of 2015, imports were at 7.98 million tonnes, down 13.6 percent over the same period last year.
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