Coking Coal Prices Seen Stalling as Supply Swells, Survey Shows


Price gains will be limited for coking coal contracts in the first quarter as supply outpaces demand, according to a survey.

Asian buyers will probably pay $155 a metric ton for hard coking coal, used to make steel, in the three-month period starting Jan. 1, according to the median of seven analyst estimates compiled by Bloomberg News. That compares with $152 a ton in the fourth quarter. Spot prices have dropped 7 percent since September to $140.70, according to data from Energy Publishing Inc.

Coking coal has tumbled as much as 20 percent this year amid rising exports from Australia, the world’s biggest shipper. That’s contributing to a glut that Citigroup Inc. estimates will reach 8.5 million tons in 2013, or about 3.3 percent of global trade. BHP (BHP) Billiton Ltd. and Rio Tinto Group are increasing output from new and expanded operations this year, even as demand from South Korea and Japan slows.

“There’s a lot of supply,” said Daniel Morgan, an analyst at UBS AG in Sydney who forecasts contracts may be settled at $160 a ton. “The pre-winter restock for the hard coking-coal products looks mainly done. Based on spot, there is downside risk to our forecast.”

Spot hard-coking coal peaked at $171 a ton in February and has averaged $153.41 this year, according to data from Energy Publishing. The forecasts in the survey for the first quarter ranged from $150 to $160. Contract prices averaged $158.50 this year and $210 in 2012.

New Mine

BHP, the world’s biggest shipper of metallurgical coal that typically sets prices for hard-coking contracts, started output from the Daunia mine during the first quarter. The project in Australia’s Queensland state will have capacity to produce 4.5 million tons each year, the company said in September.

Eleanor Nichols, a Melbourne-based spokeswoman for BHP, declined to comment on contract negotiations. The company operates mines in Australia in partnerships with Mitsui & Co. Ltd. and Mitsubishi Corp. (8058), known as BHP Mitsubishi Alliance.

Shares of BHP, which makes more than 16 percent of its sales from coal including thermal grades used in power plants, fell 1.7 percent yesterday to A$36.18 ($33) in Sydney. Rio, which expanded the Kestrel mine in Queensland, slid 0.6 percent to A$65.77.

There is ample supply of coking coal, Justin Smirk, a senior economist at Westpac Banking Corp. in Sydney, said in a note last month. A rebalancing of the market is needed before prices can recover in “any meaningful way,” he said.

Australian Exports

Australia’s total metallurgical coal exports were 14.4 million tons in August, the highest level for that time of year since 2010, according to data from the Australian Bureau of Statistics. The nation is projected to ship 157 million tons in 2013, an 8 percent increase on 2012, the Bureau of Resources and Energy Economics said in a September report.

Global exports are forecast to gain 5 percent this year to 258 million tons, a report last month from Citigroup show. Shipments are projected to climb to 264 million tons next year, widening the glut to 10.2 million tons, the bank said.

Imports into Japan, the biggest buyer of Australian coal, will remain unchanged this year at 52 million tons, according to the Bureau of Resources and Energy Economics in Canberra. South Korean purchases are projected to gain by 1 million tons to 32 million, the commodities forecaster said.

Source from : Bloomberg