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Chinese steelmakers the relative winners in coking coal surge – Mr Russell-The 18th China(Guangzhou)Int’l Meta
l &Metallurgy Exhibition
10/26/2016 steel expo- metal &metallurgy expo- |
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Mr Clyde Russel wrote in Reuters that while no steel maker will be happy with the explosion in coking coal prices, Chinese mills are the best placed to deal with the impact, given they are nowhere near as exposed to spot prices as competitors in the rest of Asia and Europe. Given that about 770 kg of coking coal is required to make one tonne of steel, the more than tripling of prices since this year''s rally took off in July will be causing pain for steelmakers, who have not enjoyed nearly as large gains in their products.
While only a small percentage of coking coal cargoes are actually sold at the spot price, the quarterly contract price was recently settled above USD 200 a tonne and customers of Australia''s BHP-Mitsubishi Alliance will be paying prices linked to monthly indexes.
Given Chinese steel makers are far less reliant of seaborne imports than those in Japan, South Korea and Britain for example, their competitive advantage has been increasing. While domestic Chinese coking coal prices have been rising, they are still well below the seaborne equivalents.
Chinese coking coal output rose 7.3% to 39.29 million tonnes in September from a year earlier, taking production for the first nine months of the year to 331.74 million tonnes, down 1.6% from the same period in 2015, the National Bureau of Statistics said on October 19. There are two main points to note from this data, firstly that coking coal has largely been spared from the cuts in domestic output that has seen China''s total coal output slump 10.5 percent in the first three quarters, and secondly, domestic production accounts for the major slice of China''s consumption.
While Australia is China''s biggest supplier, meeting almost half of import demand, the second biggest source is Mongolia. This gives Chinese steelmakers a further advantage as coking coal sourced from Mongolia is far less expensive than cargoes from the seaborne market, given Mongolia''s mines have effectively only one buyer for their output, thereby cutting their pricing power.
Mongolia supplied 12.78 million tonnes of coking coal to China in the first eight months of the year, a jump of 51.7% from the same period in 2015. In contrast, imports from Australia were 18.75 million tonnes, a gain of 8.5%, numbers that clearly indicate a mounting preference by Chinese steel mills for cheaper Mongolian cargoes.
-The
18th China(Guangzhou)Int’l Metal &Metallurgy Exhibition
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