Coking coal price hits record highs as Chinese steelmakers face pain


The price of metallurgical coal has reached record highs as trade tensions and border issues drive up costs for Chinese importers.

Coal for coking has skyrocketed despite declines in the value of iron ore attributed to Chinese steelmakers following a government directive to avoid buying from Australia.

The value has jumped to US $ 410 per tonne over the past week, which is a price that has more than tripled since early 2020.

Coking coal now overtakes iron ore as the most important input cost for many steel mills around the world.

Mining analyst Peter Strachan said that while the surge in prices seemed counterintuitive given the drop in demand for iron ore, logistical issues in Asia were at stake.

“Normally they cross the border a lot from Mongolia, but the COVID restrictions have meant they haven’t been able to have enough truck drivers to do so,” he said.

“Shipping costs have skyrocketed, the Chinese are scrambling and paying over US $ 500 per tonne for delivered goods. Ex-Newcastle, it’s well over US $ 400, it’s a new high. “

Due to weak domestic supplies of metallurgical coal, Chinese buyers rushed to source in Asia, North America and as far away as Colombia.

As a result of China’s search for new suppliers, major steel nations with little domestic metallurgical coal like India, Taiwan, South Korea, Japan and the EU are now increasingly turning to Australia.

Bowen Basin Mining Club manager Jodie Currie said the loss of the Chinese market has opened new doors for miners in the region.

“I think it gave them the opportunity to look at other markets, Queensland coal is in demand around the world,” she said.

“There were certainly shockwaves sent across the industry but we diversified, we looked at other markets.

Slip induced by the real estate market

Concerns over the financial difficulties of Evergrande, one of China’s leading real estate developers, have been seen by many commentators as a catalyst for the decline in the value of iron ore.

Analyst Peter Strachan said that with increased recycling of metals nationwide, demand for metallurgical coal in China may soon peak.

“Eventually there will be a correction, the Evergrande problem will put a stop to the expansion of the steel industry,” he said.

“We are also seeing a lot more scrap coming in [steel production] system, China will eventually move towards 20, 30% of its steel coming from scrap.

The decline in steel production through July and August due to the expected leveling off in steel manufacturing was accompanied by a decline in other polluting industries such as cement, another sector blamed for the poor air quality in Chinese cities.

“There are a number of climate and air quality issues, big polluters tend to cut spending before winter, especially with the Winter Olympics approaching,” said Mr. Strachan.

After the price of iron ore slumped from $ 230 in May to $ 93 a tonne in recent weeks, some stability has returned to the market in recent days following indications that Evergrande will pay the interest owed today. ‘hui.

The price rose above the US $ 100 mark midweek.

Supply side constraints

The recent state of the sector report from the Queensland Resources Council (QRC) highlighted a shortage of skilled workers as a drag on mining expansion during the COVID-19 era.

Describing the situation as a “perfect storm of labor shortages in an era of continued growth,” CEO Ian McFarlane pointed to government forecasts that Queensland’s coal exports will increase by 23% by 2025 .

Finding and retaining skilled workers rose to number one in the latest QRC CEO Sentiment Survey, as mining workers jumped to 85,000, a two-thirds increase in five years.

“This growth in resource jobs, which has jumped since COVID, is about six times the relative growth seen in the rest of the Queensland workforce over the same five-year period,” Mr. McFarlane.

Ms Currie said the industry has acknowledged that it has failed in worker retention in the past and is committed to making changes.

“We have probably done ourselves an injustice over the years by not investing as much as we should have,” she said.

Regarding CFMEU’s concerns about the growing precariousness of the workforce, Ms Currie said miners were in the best position to decide how to manage their workforce.

“I can see where [unions] come and there are challenges, but for mining companies, there are reasons for it.

The QRC plans to expand its Queensland Minerals and Energy Academy, aimed at encouraging students to enter mining and related careers in 100 schools by 2023.


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