Coking coal price may hit inflection point in the year end
China Industry News cited Mr Liu Jianzhong deputy GM of Shanxi Coking Coal Group Co Ltd as saying that “Coking coal price will keep rising in the second half of this year. In 2009 the price will stay at a high level yet with some fluctuations since tight global supply will be relieved.”
Mr Huang Jingan chairman of China Coking Industry Association said that as a major coke consumer, steel industry has shouldered rising costs for coke and iron ore in recent two years, but it is getting more difficult for the industry to pass on the high costs to downstream industries in the second half and the pressure may turn back to affect coke and coking coal industries in the future.
Mr Liu said that industry analysts all agreed that coking coal price would go on climbing in the latter half of this year. He said that “Scant supply in domestic market is expected to continue in the second half of 2008.”
According to Mr Huang, steelmakers face toughest situation in this year due to higher cost, lower profits, more investments in energy saving and environment protection and more difficult loans from banks.
Several factors will exert influences on coke and coking coal industries:
1. China restricts exports of resource intensive products and this will affect coke and coking coal industries negatively. The country’s coke exports increased month by month in the first half. The government may raise coke export tariff further provided the exports keep rising. Export tariff on coke and semi coke has jumped to 25% from 15% since January 1st 2008. The export tariff hike, if comes true, will impact coke exports and consequently the demand for coking coal. The proportion of China’s coke exports against global trade volume has dropped to 46.31% in 2007 from over 60% in 2000.
2. Technical progress and increasing scrap will discourage demand for coke. Operation of non to blast furnaces in 2007 has greatly decreased coke demand. Besides, ratio of putting coke into furnace reported by major steelmakers descended to 392 kilogram per tonne in 2007 from 429 kilogram per tonne in 2000. More and more scrap also weakens demand for coke.
3. Expanding capacity leads to price fluctuations. The government tightened control on safety and resource integration last year and many mines suspended or cut productions. These capacities will be released in the coming years. Rising coke price also attracts large amount of investments, which will bring many fresh capacities. By that time output will surpass demand and price will fluctuate.
4. world-wide supply will swell. The floods in Australia in this year beginning interrupted the country’s coking coal exports, which resulted in surging price in international market. But this will not work for a long time. Effective supply will grow rapidly across the world during 2009 to 2010. Tight supply will shift to a general balance and price will not jump significantly.
Tags: coal