Australia sees stronger coking coal exports

Market: Coking coal
28/06/21

Seaborne metallurgical coal supply chains have largely reorganised in response to Beijing's ban on Australian coal imports, paving the way for increasing Australian exports of coking coal over the next two years, according to the Australian government's Office of the Chief Economist (OCE).

Australian metallurgical coal exports will increase from 172mn t in 2020 to 189mn t in 2023, according to the OCE's latest Resources and Energy Quarterly (REQ) released today. At the same time prices will increase, with the OCE revising up its average spot price to $160/t fob Australia for hard coking coal for 2022 from its March forecast of $142/t.

The OCE also upgraded its outlook for global metallurgical coal trade, largely because of increased imports by China supplied by stronger-than-previously-expected exports from North America and Mongolia.

As industrial production recovers outside of China, demand for metallurgical coal is likely to rebalance, narrowing the price differential between Australian exports and Chinese imports and adding revenue for Australian coal mining firms, the OCE said in its latest REQ. Demand is set to increase in India once the latest Covid-19 outbreak is controlled, as well as in Japan, South Korea and Europe over the next two and a half years, it added.

China is paying a premium to monopolise non-Australian supplies of metallurgical coal, but there may be limited capacity for Chinese steelmakers to continue to do so given restrictions on steel sales, according to the REQ. This is a risk to non-Australian metallurgical coal prices, with Chinese imports expected to start edging down in the second half of this year.

China has locked in supplies from Mongolia by upgrading rail connections, with higher-cost supplies from North America and Russia likely to be the first to be affected by any drop in Chinese imports. But China has run down stockpiles built up in early 2020 and may be required to import to replenish these, the June REQ said.

The OCE's 2021 average spot hard coking coal price forecast of $133/t fob Australia is higher than the premium hard coking coal price that Argus has assessed at around $129/t in the year to date for 2021, implying that the OCE expects stronger prices in the second half of the year. Argus last assessed the premium hard low-vol coking coal price at $182.50/t fob Australia on 25 June, up from a high of $107.75/t on 3 May.

By Jo Clarke

Australian government's coking coal forecasts				mn t
	2020	2021 f	2022 f	2023 f

World trade	298.5	314.8	324.4	336.8
Exports
Australia	171.8	175.7	183.4	189.5
United States	36.8	37	31	29
Canada	32.1	35	36	36
Russia	22.4	24	24	32.3
Mongolia	23.9	30	33	33
Imports
China	75.5	85.2	84.8	84.3
India	54.7	56.0	64.5	73.0
Japan	42	44	45	45
European Union	35	39	37.8	36.5
South Korea	33	32	31	33
Prices
Spot price expectation June update (US$/t)*	128	143	160	149
Spot price expectation March forecast (US$/t)*	128	133	142	148
Source: OCE
f = forecast, *real in 2021 US$

Metallurgical coal prices $/t

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