It began with iron ore, and now coal – for the same reasons
Steel prices recently went off the charts from the country’s iron ore import curb, and violently shook the construction sector. The impact from supply shortage is now showing up in coking coal, stretching steelmaking to its limits.
Prices surpassed iron ore’s
China’s continual weaning off Australia’s iron ore has left itself in a conundrum. A lethal mix of carbon emissions regulation in force, delayed shipments and punctured domestic production turned up the heat for coal prices. The resulting supply shortage was thankfully addressed by Brazil, and is now the latter’s golden goose. This makes coking coal prices officially the most expensive ingredient for steelmaking, and hiked production costs between 50 to 60 per cent. The hike is not expected to improve in China. S&P Platts observed coking coal makes up between 50 to 70 per cent for metal produce.
A source from a Shandong mill confirmed the costs of coking coal increased to about 70 per cent of the total raw material input since May 2021. “Rising domestic prices since May 2021 have made the seaborne materials more attractive for east coastal mills like ours, as imports were relatively cheaper and this could help save transportation costs by RMB 200-300/mt, compared with sourcing from the Shanxi Province,” the source noted. Another from Hebei concurred, “As iron ore costs have dropped below 50 per cent of the total hot metal production cost from a typical level of 60 per cent since July, coking coal is now the biggest input cost.”
Looking outwards for supply
Market sources said about 90 per cent of the Chinese met coal consumption is dependent on domestic production. Platts assessed Premium Low Volatile Hard Coking Coal (HCC) at an all-time high of $562.00/mt free on board (FOB) Australia on 16 September 2021. Meanwhile, domestic Shanxi PLV grades were assessed at $562.29/mt on cost and freight (CFR) China equivalent basis.
Industry players lamented Chinese steel mills are now reduced to source for alternatives; premium hard coking coal from the United States and Canada, and injected pulverized coal from Russia, amid an unofficial import ban on Australian coal. China Customs data also showed trade flows for softer coals from Indonesia, Colombia and Mozambique over recent months. Will this spark a new trend for China’s newbuildings?
Marine Online News Team
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