Never before has the global coal market undergone such a disparate phase. Evidently the global economic recession has taken toll of the underlining strength of raw material market. Coal market has traditionally fostered on supply demand unbalance enabling them to cater over the worst of times with impunity.
However off late the suppliers in this haloed segment have been at the receiving end in equal measure in consonance with the finished products. With each quarterly settlement the redundancy of the prices has been amplified proving spot transactions more prudent.
After hard landing of 24% drop in hard coking coal prices from USD 225 per tonne in Q3 to USD 170 per tonne in the BMA-Nippon settlement repeated with equally buffeting drop of 23% in Ultra Low Volatile PCI from USD 162 per tonne to USD 125 per tonne market took no time to pooh-pooh any expectation of buoyancy with the spot prices prevailing at USD 140 per tonne to USD150 per tonne and USD 100 per tonne to USD 105 per tonne respectively.
Current plats FOB and CFR India for various grades are as under
HCC Peakdown - USD 141.5 FOB, USD 156 CFR
Premium LV - USD 141.5 FOB, USD156 CFR
HCC64 Mid Vol( ICSL MV) - USD 142 FOB, 157 CFR
LV PCI - USD 102.5 FOB, 117 CFR
LV 12 % Ash PCI - USD 95 FOB, 109.5 CFR
Semi Soft - USD 94 FOB, 108.5 CFR
Gory picture looks even more ominous when lack of interest of Indian and Chinese buyers is perceptible as the year draws to a close. Mills indulge in stockpiling in Q4 before the winter sets in however the enthusiasm has transformed into bidding for time to eke out an even cheaper deal in the spot market.
Drop in crude steel production China from 1.97 million tonnes per day from end August to 1.875 million tonne per day in mid-September explains the slackness in buying. Indian mill on the hindsight have been fending any Australian arm twisting with cheaper offers from USA.
Steel mills have sagaciously leaned towards monthly pricing or spot deals to freeze volumes lest face inventory pile up at pitheads and cost overruns.
Even though experts have been prophesizing turn around in Q1 & Q2 2013 given the recalcitrant economic crisis despite a slew of stimulus package in USA, China ,Europe and Japan denies any affirmation. However every cloud has a silver lining. In the medium to long term at least coking coal prices would redeem owing to short supply and demand revival for steel in China and India with infrastructural projects coming to fruition. Scarcity of Prime grade hard coking coal will ward off speculative vacillations sooner rather than later.
Source - Strategic Research Institute
(www.coalguru.com)
