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Coking coal prices to rise on China stimulus
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Monday, 01 Oct 2012
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Business Standard reported that the recent stimulus package announced by China to give a push to the infrastructure sector, coupled with a cut in production of high cost coal by Australian miner BHP Billiton, is likely to boost prices of coking coal.

According to analysts, contract prices of coking coal, USD 170 a tonne for the October to December quarter, are set to firm up by at least USD 10 a tonne in the January to March period.

Mr Ganesan Natarajan whole time director and president of Kolkata based Ennore Coke, a maker of metallurgical coke said that “The Chinese stimulus package of USD 1 trillion is bound to boost coking coal prices and I feel contract prices will reach the level of at least USD 180 a tonne for January to March. For October-December, BHP Billiton has fixed the contract deal with Nippon Steel of Japan at USD 170 a tonne. But any price movement is expected to happen only after December end, as it will take some time for investments in infrastructure to happen and steel output to grow.”

He said spot prices of coking coal were ruling at 148 a tonne but they are also expected to rise by USD 8 to USD 10 a tonne after December, following an uptick in demand.

He added that “Currently, spot prices of coking coal are lower than the contract prices owing to slump in demand. But gradually, spot prices will close in on the gap with contract prices as demand picks up.”

Mr Pukhraj Sethiya manager energy (coal & mining) of global accounting & consultancy firm PricewaterhouseCoopers said that “The stimulus package announced by China with focus on the infrastructure sector will give a boost to steel demand, which has been slowing in China for some time now. This will also improve coking coal demand and might lead to a higher than expected increase in prices. The impact on coking coal might be higher if the supplies are restricted due to production cut by suppliers of coking coal.”

He admitted the market for coking coal still remained bearish due to slow demand growth. There is a slowdown in the Chinese economy which has led to coking coal inventory piled up at its ports and steel mills.

Source - Business Standard


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