Coking Coal Prices May Jump to $300 a Ton as Australian Floods Curb Supply

Coking coal may reach $300 a metric ton this year in the spot market as flooding in Australia crimps supply and demand gains in China and India, coal researcher McCloskey Group Ltd. said. 

“There will be higher demand for coking coal this year, while supplies are most likely going to be less,” Gerard McCloskey, the founder of the U.K.-based company, said in an interview in New Delhi. “There are more steel capacities coming up in Asia this year and there has been a recovery in consumption in the European Union and U.S.”

BHP Billiton Ltd., Rio Tinto Group, Xstrata Plc and other coking coal producers in Queensland state, which supplies about half of global output, have said they may miss deliveries after Australia’s worst floods in 50 years. Steel usage may rise 5.3 percent this year, the World Steel Association estimates. 

Steelmakers including ArcelorMittal and Nippon Steel Corp. may have to pay about 38 percent more than 2010 prices in the spot market if steel gains or hovers at the present level of $700 a ton, McCloskey said yesterday in the interview. The average contract price for coking coal next year will be higher than this year’s average $214.50 a ton, although supplies from U.S., Canada, Mongolia, Indonesia, Russia and Mozambique plug a part of the deficit from Queensland, he said.

Global Demand

Global coking coal demand may gain about 7 percent this year to 245 million tons from about 230 million tons in 2010, said McCloskey, who is attending a three-day steel conference that began yesterday in New Delhi. Shipments may rise to 415 million tons by 2020, he said. 

About 15 million tons has already been lost in the Queensland floods, of which a third is thermal coal, said McCloskey. Mongolia may supply 25 million tons to 40 million tons to China, easing the burden, McCloskey said. 

Indian steelmakers may double coking coal imports to 60 million tons by 2017 and 90 million tons by 2020 as newer capacities come on stream each year, he said. China’s coking coal imports will probably rise to 110 million tons by 2020 from 37 million tons in 2009 and about 53 million tons last year, he said. 

Prices of hard coking coal may reach between $400 and $500 a metric ton after rainfall intensified in Australia’s flood-hit Queensland state, consultant Wood Mackenzie Ltd. said on Jan. 15. 

Coal for use in power stations may rise to more than $197 a ton from the current $140 at Australia’s Newcastle port, the world’s biggest coal-export facility, according to an e-mailed report dated Jan. 14. The Edinburgh, U.K.-based company did not provide comparative prices for hard coking coal, or state a time period for the forecast gains. Source: Bloomberg