Coking coal availability is extremely tight

Coking coal availability is extremely tight

Year 2004 was scene to significant price rises for all raw materials, and particularly for iron ore and coal, on the back of the Chinese demand. High level of energy requirement and weak US Dollar have had their impact on the prices as well. The demand for coking coal, a vital raw material for steel production is high and supply is very tight in all markets. Steel producers in Japan, India, South Korea, Europe and Ukraine are all raising demand for the material, besides the domestic demand in Canada and the US. Traders report that the availability of coking coal from these origins is pretty tight for export purposes, no matter how high the demand is. Most of the steel producers are setting their coking coal procurement expenditures more than double in 2005. Coking coal contract prices have been on the rise for the last 5-6 years and finally have more than doubled reaching a range of 120-$140/mt FOB. The spot price currently stands at $130-140/mt FOB levels from these origins. The most recent contract reported was concluded at $125/mt FOB basis between the Canadian Coal producer Grande Cache Coal Corp. and South Korean steel giant POSCO. There are other long term contracts signed for this commodity for large tonnages mainly at the same price level as well. Contracts concluded by the Japanese Steel Mills (JSM) are considered as benchmark price and them being doubled compared to the last contract prices, will have an uplifting impact on all steelmakers receiving supply from the international market. An uprise of coking coal consumption is also foreseen in view of all the capacity expansions on the run by many steel mills worldwide, which will inevitably increase their raw material requirements. China will certainly play its role in increasing the raw material demand in the market, too. At the end of the day, the tight market conditions for coking coal will unavoidably be reflected to the steel product prices, squeezing the margins of the steelmakers. On the other hand, some believe that with new production coming in line slowly will cool down the skyrocketed prices to an extent throughout the year. But still, it must be said that particularly for high and low volatile material, the market is seriously tight for the moment.