McCloskey underlines the recent changes of coking coal market structure
During the meetings held under the framework of IISI-38, Gerard McCloskey, the Chairman of the reputable The McCloskey Group explained the dynamics of the world coking coal market and the recent changes of its structure. According to Mr. McCloskey, the year 2004 was a turning point for the coking coal producers that have been somewhat forced to work for the interest of the consumers so far. Now that the balances of the market having been changed with the demand for coking coal, a key raw material for steel making, becoming more and more high in terms of demand the producers have more rights to say for the pricing today. Through many years, coking coal consumers were able to manage finding supplies from Chinese coke-making industry that was known a little or if not additional cargoes of short notices from other sources. However, this year China have significantly reduced the supply as it has become a serious importer itself and changed the balance of the market. On top of such remarkable change, Polish exports were also down and production in Queensland, Australia and the low-volatile production in the US had seen lengthy disruptions. With Chinese economy continuing to grow at 7% the steelmaking capacity in the South also maintains its pace. Such levels of production need to be supported by growing imports. Coking coal imports at 3 million mts in 2003 are expected to reach 20 million mt levels by 2010, under these circumstances, according to McCloskey. Mr. McCloskey explained that with such developments on the supply side, the strong steel making industry raising the coking coal demand continuously along with both the newcomers like India as well as the traditional suppliers had to face this unexpected serious supply difficulty. The rising demand of steam coal in the local US market also had its impact on prices. Accompanying this fact, the acquisition of Queensland producer MIM by Xstrata, with its biggest shareholder Glencore also changed the much less gentelmanly profile of the steam coal market. Today, the coking coal supply side is now trying to improve capacity to meet the insatiable demand both in traditional supply areas like Australia and Canada and also new mining areas such as Eastern Russian Siberia and Indonesia and Colombia. Russia appears to hold a great opportunity to fill the gap left by the US and Poland for supplying the growing Asian market. Mr. McCloskey sees the market in 2005 precariously balanced, with even greater demand and some additional material added. He expects the prices to get even higher but believes that such prices can easily be afforded by the steelmakers.