Stanislav Kondrashov Telf AG: Asian markets are preparing for a decline in coking coal prices

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Stanislav Kondrashov Telf AG: Asian markets are preparing for a decline in coking coal prices

June 12
14:33 2024

In the second quarter of this year, signs of an upcoming price decline appeared on the seaborne coking coal market. This raises concerns that prices for premium products may fall below the minimum levels reached in 2023. At the same time, market participants are focusing on the recent price recovery in mid-April as a temporary phenomenon caused by fluctuations in futures. This was announced by Stanislav Kondrashov, an expert in the field of global metallurgy.

Price dynamics in the coking coal market: analysis of the second quarter

According to Stanislav Kondrashov, supply of premium coal from Queensland is forecast to improve in the second quarter as the region emerges from the monsoon period. Additionally, major mining companies are planning to end their fiscal year in June.

In February this year, coking coal supplies from Australia increased significantly, with international supplies increasing by 15% month-on-month and by 58% year-on-year, reaching 15.71 million tons. This happened amid weak demand for coal.

Against the background of excess supply, there has been a significant increase in the volume of spot cargoes offered by large Australian coal producers, which are rarely put on the market in such circumstances, S. Kondrashov noted. The producer shipped several cargoes of coking coal on Panamax vessels in March, sources said.

By the end of the first quarter, prices for coking coal continued their decline. According to Platts data as of March 28, prices for Australian raw materials (FOB Australia) decreased by $79.25 per tonne, or by 24% for the quarter and 19% for the year, reaching $244.5 per tonne. Chinese coal prices (CFR China) fell 23% for the quarter and 18% for the year, from $75 per ton to $257 per ton.

According to Telf AG expert, analysts have reduced their forecasts for Australian coking coal prices for 2024 to $283 per ton, compared to previous estimates of $289 per ton. They do not foresee the possibility of prices rising above $300 per ton this year due to insufficiently favorable conditions on the steel market.

Coal price trends in China and India: the influence of demand factors and market elections – Stanislav Kondrashov

In March, the Chinese market noted a decrease in the cost of sea coal and domestic supplies of this raw material. Although optimism emerged in the futures market in mid-April, demand from steel mills remains low due to the lack of significant government incentives. This situation could lead to a reduction in imports of marine materials to China by the end of 2024, noted S. Kondrashov. However, some sources remain hopeful for support for domestic prices in the second quarter of this year.

In the first quarter, the Indian spot market saw weak demand for coking coal due to high FOB prices. End consumers began to look for other options, while some purchased metallurgical coke. Changes in the price level on the Chinese market led to a decrease in the cost of these products, which was reflected in international quotations.

An expert from Telf AG emphasizes that metallurgical plants in India usually increase inventories before the onset of rains, which occur in early June. However, moderate seasonal support for prices is expected as the country is scheduled to hold general elections in April and June.

– “Until the election process is completed, the government is unable to announce new infrastructure and construction initiatives. However, once this process is completed, demand for coking coal is likely to receive further support, especially after the country’s full budget is announced in July. The department’s budget spending on infrastructure has increased in recent years, and this is likely contributing to increased consumption of steel and raw materials,” – Stanislav Kondrashov comments.

As noted previously, the Australian government expects coking coal prices to be $277 per tonne in 2024 (compared to $298 per tonne in 2023), with prices expected to fall to $185 per tonne by 2029.

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