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Mar 20, 2024

Global premium coking coal prices to stay firm in H2CY23: Experts at SteelMint summit

*PHCC prices expected to remain in $230-250/t range *India, SE Asia emerging nerve-centre of global met coal market *Lack of pricing power affecting Indian coking coal buyers *Threat of cheap Chinese

*PHCC prices expected to remain in $230-250/t range

*India, SE Asia emerging nerve-centre of global met coal market

*Lack of pricing power affecting Indian coking coal buyers

*Threat of cheap Chinese coke exports persists in H2

Global premium hard coking coal (PHCC) prices are expected to remain firm at around $230-250/t FOB Australia in H2CY'23, although looming steel production cuts in China pose a downside to this outlook. The focus of the market is India and South East Asia where steel-making capacities are poised for a sharp surge in the coming years. However, the seaborne PHCC market has remained undersupplied over the last few years, said experts who were part of the panel on 'Global metallurgical coal and coke market outlook' at SteelMint Events' 3rd India Coal Outlook Conference held recently in Kolkata, India.

The experts on the panel were Rashmi Singh, Chief General Manager, In-charge Coal Import Group-SAIL; Puneet Jagatramka, EVP-Opex and Bulk Procurement, JSW Ltd.; Amita Khurana, Group Chief- Raw Materials Procurement, Tata Steel; Himanshu Bajaj, President, IMR; and Tiankuo Jiang, Metallurgical Coal and Coke Trader, CCS, who attended online.

Key takeaways from the session:

Demand, supply, prices

*Global crude steel production is expected to increase by 2.3% in 2023 from 1.88 billion tonnes (bnt) last year to 1.92 bnt, as per WSA. Global coking coal demand is likely to reach around 819 million tonnes (mnt) this year from roughly 800 mnt in 2022.

*China and India recorded a y-o-y increase in crude steel production by 1.3% and 7.4%, respectively, in H1CY'23. Coking coal demand, therefore, has remained firm.

*Despite the ending of the La Nina pattern, PHCC supplies from Australia have remained under pressure unlike weaker coking coal grades. Supplies from Canada, too, have remained under pressure.

*Prices have inched up to around $235-240/t FOB Australia for PHCC from below-$220/t levels. Prices are expected to hover in the $230-240/t region in H2.

*BF-BOF steel-making capacities are on the rise in India. Similarly, in SE Asia new steel-making capacity of around 45 mnt is on the anvil. These markets will be the centre of focus for met coal suppliers.

*JSW Steel has targets to raise production to 37 mnt by 2025-2026. Tata Steel is planning to enhance capacity to 40 mnt, while SAIL is targeting to raise production to 22-24 mnt in the short-term.

*Chinese steel production cuts are expected in H2. However, the EAF mills in China have witnessed a decline in production as opposed to the BF mills due to electricity shortage amid extreme weather events and less availability of scrap. So, coking coal demand has not been affected.

*China's seaborne met coal purchases are all spot transactions. Although domestic coal production in China is expected to edge up, if hot metal output remains high there could be tightness in spot supplies, which may boost prices.

PCI consumption

*Demand for PCI coal is likely to inch up to 226 mnt in 2023 from 221 mnt last year.

*Indian mills are increasing consumption of PCI coal in BFs and have increased sourcing of relatively cheaper PCI from Russia. This is with the objective of lessening the consumption of met coke in BFs and decreasing the fuel rate.

*SAIL intends to increase PCI consumption from around 110 kg/per tonne of hot metal to 150 kg/per tonne of hot metal. Mills can raise their PCI usage to around 180-200 kg/per tonne of hot metal.

Coking coal index

*Indian buyers are seeking to diversify coking coal imports, increase sourcing from domestic sources (BCCL, CCL), as well as acquiring coking coal mines in commercial auctions.

*JSW chief has recently announced that the company may acquire 20-40% stake in Teck's coking coal mines in Canada.

*Despite being leading seaborne importers of coking coal, Indian mills have little pricing power. The need of the hour is an index for coking coal which represents the market better.

*Any potential index has to ensure both liquidity and transparency.

*Indian mills should procure a certain portion of their requirements on contract basis, while the rest can be sourced on spot basis, with guaranteed offtake arrangements. This may boost their pricing power.

Met coke dynamics

*The global met coke market is slowly shrinking, with large captive capacities coming up in India and Brazil.

*Coking coal prices over $200/t is unviable for merchant coke producers in India. The threat of cheap imports is affecting the domestic coke industry.

*Around 17 mnt of met coke capacity is in the pipeline in Indonesia, largely backed by Chinese investments.

*In the event of steel production cuts in China in H2 of this year, more coke exports by China are apprehended which is likely to hit the domestic coke industry hard.

*PHCC prices expected to remain in $230-250/t range

*India, SE Asia emerging nerve-centre of global met coal market

*Lack of pricing power affecting Indian coking coal buyers

*Threat of cheap Chinese coke exports persists in H2

Global premium hard coking coal (PHCC) prices are expected to remain firm at around $230-250/t FOB Australia in H2CY'23, although looming steel production cuts in China pose a downside to this outlook. The focus of the market is India and South East Asia where steel-making capacities are poised for a sharp surge in the coming years. However, the seaborne PHCC market has remained undersupplied over the last few years, said experts who were part of the panel on 'Global metallurgical coal and coke market outlook' at SteelMint Events' 3rd India Coal Outlook Conference held recently in Kolkata, India.

The experts on the panel were Rashmi Singh, Chief General Manager, In-charge Coal Import Group-SAIL; Puneet Jagatramka, EVP-Opex and Bulk Procurement, JSW Ltd.; Amita Khurana, Group Chief- Raw Materials Procurement, Tata Steel; Himanshu Bajaj, President, IMR; and Tiankuo Jiang, Metallurgical Coal and Coke Trader, CCS, who attended online.

Key takeaways from the session:

Demand, supply, prices

*Global crude steel production is expected to increase by 2.3% in 2023 from 1.88 billion tonnes (bnt) last year to 1.92 bnt, as per WSA. Global coking coal demand is likely to reach around 819 million tonnes (mnt) this year from roughly 800 mnt in 2022.

*China and India recorded a y-o-y increase in crude steel production by 1.3% and 7.4%, respectively, in H1CY'23. Coking coal demand, therefore, has remained firm.

*Despite the ending of the La Nina pattern, PHCC supplies from Australia have remained under pressure unlike weaker coking coal grades. Supplies from Canada, too, have remained under pressure.

*Prices have inched up to around $235-240/t FOB Australia for PHCC from below-$220/t levels. Prices are expected to hover in the $230-240/t region in H2.

*BF-BOF steel-making capacities are on the rise in India. Similarly, in SE Asia new steel-making capacity of around 45 mnt is on the anvil. These markets will be the centre of focus for met coal suppliers.

*JSW Steel has targets to raise production to 37 mnt by 2025-2026. Tata Steel is planning to enhance capacity to 40 mnt, while SAIL is targeting to raise production to 22-24 mnt in the short-term.

*Chinese steel production cuts are expected in H2. However, the EAF mills in China have witnessed a decline in production as opposed to the BF mills due to electricity shortage amid extreme weather events and less availability of scrap. So, coking coal demand has not been affected.

*China's seaborne met coal purchases are all spot transactions. Although domestic coal production in China is expected to edge up, if hot metal output remains high there could be tightness in spot supplies, which may boost prices.

PCI consumption

*Demand for PCI coal is likely to inch up to 226 mnt in 2023 from 221 mnt last year.

*Indian mills are increasing consumption of PCI coal in BFs and have increased sourcing of relatively cheaper PCI from Russia. This is with the objective of lessening the consumption of met coke in BFs and decreasing the fuel rate.

*SAIL intends to increase PCI consumption from around 110 kg/per tonne of hot metal to 150 kg/per tonne of hot metal. Mills can raise their PCI usage to around 180-200 kg/per tonne of hot metal.

Coking coal index

*Indian buyers are seeking to diversify coking coal imports, increase sourcing from domestic sources (BCCL, CCL), as well as acquiring coking coal mines in commercial auctions.

*JSW chief has recently announced that the company may acquire 20-40% stake in Teck's coking coal mines in Canada.

*Despite being leading seaborne importers of coking coal, Indian mills have little pricing power. The need of the hour is an index for coking coal which represents the market better.

*Any potential index has to ensure both liquidity and transparency.

*Indian mills should procure a certain portion of their requirements on contract basis, while the rest can be sourced on spot basis, with guaranteed offtake arrangements. This may boost their pricing power.

Met coke dynamics

*The global met coke market is slowly shrinking, with large captive capacities coming up in India and Brazil.

*Coking coal prices over $200/t is unviable for merchant coke producers in India. The threat of cheap imports is affecting the domestic coke industry.

*Around 17 mnt of met coke capacity is in the pipeline in Indonesia, largely backed by Chinese investments.

*In the event of steel production cuts in China in H2 of this year, more coke exports by China are apprehended which is likely to hit the domestic coke industry hard.