TPT March 2011

G lobal M arketplace

throughout Asia – will be concerned for their supplies. If they must turn to the spot market they will find prices of coking coal on the rise and going higher. › According to the London-based independent business analysis and consultancy group CRU, the global seaborne metallurgical coal market in 2010 totalled around 5 million metric tons per week. Of this, just over 3 million mt was supplied by Australia. Queensland provided the vastly greater part of this total, with a small amount coming from New South Wales. The principal destinations for Australian coking coal are Japan (approximately 30% of deliveries); India (15%); China (10%-15%); Western Europe (10%-15%); and South Korea (10%). On 11 January the marketing/industry analyst of Steel Market Update, Sophia Fain, noted that the flooding in Australia was taking place against a backdrop of tightness in all markets for the raw materials of steel making. Not surprisingly, she wrote, coking coal-related pressures were driving coke prices higher, while iron ore prices remained at elevated levels due to reduced supply from India. › With first-quarter coking coal contract prices locked in at $220- 225/mt FOB, Ms Fain summarised the outlook for the remainder of 2011. Clearly, she said, second- and third-quarter prices will be higher. Among her other main points: ◆ A one-month cessation in coking coal exports from Australia could equate to a total loss of around 10 million mt, or 4% of the annual seaborne market; ◆ This would have the potential to cut world crude steel production by around 20 million mt, which is equivalent to 1.3% of annual world production; ◆ Of course, the actual impact on crude steel production will depend upon the extent to which steel mills can maintain output from their inventories of coking coal, and/or the extent to which other coal producing nations can fill the shortfall in the coal requirements of the steel mills. ( steelmarketupdate.com , 11 January) Elsewhere in steel . . . › The Russian government has cut a special duty on imports of stainless steel tube and pipe with outside diameters up to 426mm, from 28.1% to 9.9%, but not less than $1,500 per metric ton. As reported by SteelOrbis (24 December), the decision of 16 December was to take effect one month after that official publication date. The higher special duty, imposed in November 2009, was to have run for a period of three years. The new, lower special duty does not affect Russian imports of stainless steel tube and pipe from Belarus or from developing countries which come under the scope of Russia’s Generalized System of Preference, with the exception of Brazil, China, Taiwan, Hong Kong and Macau. › In other news from Russia, the country’s second-largest steel maker, Severstal, is teaming up with India’s NMDC to build a $5 billion plant in the southern Indian state of Karnataka. With a rated capacity of 5 million metric tons, the facility – for which NMDC, the third-largest iron ore producer in Asia, will also source coking coal from Severstal – is intended to help meet demand

Steel

Floods have hit the Australian steel market

The world steel industry braces for coking coal prices pushed sharply higher in the wake of the winter floods in Australia Heavy rains that began on 25 December would flood some 350,000 square miles of northeast Australia, closing hundreds of roads and affecting more than 200,000 residents before ending on 3 January. Worse was to come when the deluge resumed, but even that preliminary reckoning was enough to confirm that coal and gas production in Queensland, the country’s top coal producer, would suffer severe disruption. National Underwriter P&C, which covers the property and casualty insurance industry, reported on 4 January that the Queensland Resources Council expected lost coal and gas production in the state to run to hundreds of millions of dollars. Queensland, the epicentre of the flooding, provides 50% of the world’s supply of coking coal. Paralysed by the rains, mining of this crucial component of steel production was feared liable to remain idle for many months. Rail lines that carry the coal to ports for export were also flooded out. “We have three-quarters of all of our coal fields unable to operate and unable to supply markets,” Premier Anna Bligh of Queensland State told the International Business Times . “There is likely to be a significant long-term effect from that, not only national but internationally.” Over the three weeks to that point, the global spot price of coking coal produced in Queensland spiked from $225 to $253 per metric ton. The last major flood in the area, in 2008, saw a peak of $305 per mt in the spot price. China, which in November accounted for some 44% of global steel production and is heavily reliant on high-quality Australian coking coal, will be hardest-hit as the squeeze develops. A typical purchaser, Taipei-based China Steel, obtains 80% of its supplies from Australia. Now, Chinese producers – indeed, steel makers

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