TPT March 2011

88 / 259

86 March 2011 ›
Global Marketplace
Steel 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
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