The coking coal market could again be in for a volatile ride in 2018 after a helter-skelter 2017 that saw massive price volatility caused by weather events and Chinese policy decisions.


Last year also saw a significant shift in the way coal was priced, with indices provided by price reporting agencies instead of one-on-one negotiations being used for the first time by Japanese steelmakers to settle quarterly benchmarks. 


And pricing volatility was again the name of the game, after 2016 was also a rollercoaster. 


Metal Bulletin’s premium hard coking coal index closed 2017 at around $260 per tonne fob Australia, started the year at $223 per tonne, hit a low of around $145 per tonne in late March and a high of nearly $300 per tonne in mid-April.


That is exceptional volatility, except if seen in the context of 2016. That year, prices rose from around $77 per tonne at the beginning of the year all the way to $309 per tonne, where they plateaued.


One has to go back to 2015 to find a year where normalcy reigned. Prices then swung ‘only’ between $110 and $134 per tonne, according to Metal Bulletin’s index. 


With China in the game however, normalcy could be difficult to attain. The country’s spot buyers are keenly aware of price changes and hold off when they sense prices are too high, as currently seems to be the case. 


Chinese demand should remain healthy given the country’s reliance on blast furnace steelmaking, but an environmental crackdown could mean a reduction in overall output.


The Australian government expects an easing of coking coal prices in early 2018 and throughout the year because of a winter steel mill shutdown in China, according to the country’s Office of the Chief Economist. But supply concerns remain, because of possible labor actions and weather disruptions.


Australia’s metallurgical coal exports are expected to rise to 193 million tonnes in 2018-2019, up 4.2% from 2016-2017. China is their biggest customer. US exports also climbed, by 11 to 12 million tonnes, to 46 million tonnes, but that number is unlikely to grow further in 2018 as struggling miners might find access to capital blocked again after a relatively prosperous 2017 where they filled global supply gaps, according to Australia’s chief economist office.


Japanese steelmakers for the first time are using index pricing to set quarterly contracts, because of severe price volatility. But it remains to be seen whether this reliance on indices will continue, and which index providers will be used. 


So 2018 could again be a volatile year, with possible supply disruptions, pricing changes and Chinese policy all things to watch out for. 




This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.