Coking Coal Prices Soar Due to Supply Disruptions

Coking coal prices are surging, with prices now nearly double what they were two weeks ago as Cyclone Debbie caused massive supply disruptions to Australia’s coal industry.

The Cyclone caused serious damage to rail lines serving mines in the state of Queensland and also disrupted mining activities. It could take a month or longer for things to get back to normal, and according to Mining Weekly, roughly 12–13 million tons of Australian met coal cargoes destined for China, India, and Japan could be delayed.

Spot premium coking coal prices have surged above $300 per ton (FOB Australia). While they are nearly double what they were two weeks ago, they have more than tripled from one year ago. Coking coal prices started to rally last year as China cracked down on domestic production while demand for coal from steel production increased. In late 2016, coking coal peaked above $300 per ton, but then prices collapsed on the possibility that China would relax its mining regulations. They bottomed around $150 and traded in the $150 to $160 range until Cyclone Debbie catapulted prices.

Meanwhile, according to various media reports, China has turned back a fleet of North Korean cargo ships carrying coal as the country enforces a trading ban on North Korea due to its missile tests. China banned all imports of North Korean coal on Feb. 26, but there was skepticism over whether or not China would follow through on this ban. China’s demand for imported coal increased after the country forced domestic producers to reduce production. The need for coal imports is particularly high right now due to the disruptions in Australia. The fact that China turned back ships carrying coal to North Korea while supplies from Australia have been hit suggests that the country is very serious about the export restrictions.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.