Met coal prices may soften further
By Purchasing Staff -- Purchasing, 8/29/2005 2:00:00 AM
Industry experts disagree on the early-2006 trend in metallurgical coal prices, but there seems to be no disagreement that met coal prices are lower now than a few months ago. The 2004 average price of high-volatile metallurgical coal (used to make coke) was $45/net ton. At one time last spring, the spot price was as high as $125 but it has slipped to $70 to $75 per short ton currently. Domestic steel production is down 4.8% through July (and, therefore, domestic coke is off) and both could go lower next year—softening met coal prices further.
The Energy Information Administration reports that as coking coal prices have softened, some customers from 2004 are contacting U.S. suppliers demanding to have last year’s prices adjusted down. The mavens reckon that if met coal prices go $5 to $10 lower, many in the current crop of met coal producers will switch output to steam coal for the energy market. Actually, metallurgical coal markets became volatile when the thriving Chinese steel industry in late 2003 and 2004 made outsized demands for coking coal and met coke, driving up prices. Now the flip side of that expansion—diminishing demand—has let met coal prices fall. The decline results not from lower demand for steel and lower steel prices in China but from mandates by the Chinese government to temper growth in domestic steel consumption and to lower coke production for domestic and export markets. (Actually Chinese steelmaking has risen 42% this year and is on a path to reach almost 320 million metric tons.) The coke-manipulation idea was to raise international met coal and coke prices—which haven’t happened because non-Chinese steel production is off almost 2%.
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