Chinese steel mills are paying exorbitant prices for coking coal, an essential ingredient in the steel making process, but there could be worse to come with a looming disruption to Australian shipments of iron ore, another critical steel-making material.
The coking coal issue was identified earlier this month by Argus, a commodity research firm, and confirmed yesterday by Shaw and Partners, an Australian stockbroking firm.
The iron ore issue, which could drive the price to a fresh 10-year high of more than $172 a ton, is a weather forecast for the Australian north-west coast where a cyclone (hurricane) is forming.
A storm heading for the world’s busiest iron ore port in Australia could drive the price of the … [+]
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The Australian Government’s Bureau of Meteorology is forecasting that a tropical low forming in the Timor Sea will become a cyclone on Thursday and be sitting off Port Hedland, the world’s biggest iron ore export port on Friday potentially forcing the port to close while the weather system passes.
The possible closure of Port Hedland, if only for a few days, will put further pressure on an already tight iron ore market which has been driven by strong demand and supply disruptions.
Argus reported on January 5 that Chinese coking (or metallurgical) coal prices had risen to more than $100 a ton above the Australian export price, largely as a result of China’s increasingly ineffective ban on Australia coal.
$135 A Ton Price Difference
Shaw, in a research report published earlier today, calculated that the price difference had blown out to around $135/t.
According to Shaw the price of premium Australian coking coal is currently around $115/t whereas the price of Chinese domestic coking coal, and material sourced from Canada and the U.S. is around$250/t.
China’s ban on Australian coal is delivering bumper profits for Canadian and U.S. coal mining companies but it is also starting to create a black market with Australian coal finding its way into China via traders in other countries.
The lid was lifted a little on the increasingly murky world of coal trading last week in a report filed with the Australian stock exchange by the independent Australian coal miner, Whitehaven.
In a comment on the outlook for coal, Whitehaven said China’s restrictions on Australian material had altered seaborne coal trade flows.
Australian coal is said to be finding its way into China despite a Chinese Government ban. Photo … [+]
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But the mining company also indicated that Australian coal was almost certainly being consumed in China.
“Instead of being delivered to China, Australian coal is now finding customers in alternate destinations including India, Pakistan and the Middle East, and traded coal historically delivered into these markets is finding its way into China,” Whitehaven said.
Taken with the Whitehaven comments on Australian coal eventually finding its way into China the Shaw remark indicates that coal mining companies are finding a way to deal with the Chinese ban.
