By Clyde Russell
LAUNCESTON, Australia- When looking at the commodities used to make steel, iron ore gathers the bulk of headlines given its strong link to the perceived health of China’s economy.
But metallurgical coal is also a key input, and this fuel has quietly been a top performer in the energy commodity space in recent months.
Australia dominates the seaborne market for metallurgical coal, accounting for more than half of global volumes, and about three times the shipments of the next biggest exporter, the United States.
The price of Australian metallurgical coal, also known as coking coal, on the Singapore Exchange ended at $315 a metric ton on Wednesday.
The contracts, which are linked to the free-on-board price in Australia, have risen 40.3 percent since the 2023 low of $224.50 a ton on July 6.
In contrast, high-grade Australian thermal coal is only 0.5 percent higher than its 2023 low, while Brent crude oil has risen 13.4 percent from its low in December, and spot liquefied natural gas is down 2.2 percent from the weakest it was in 2023.
While the price is well below the record $635 a ton reached in March 2022 amid fears to global supplies after Russia’s invasion of Ukraine in February of that year, it’s still well above the broad $100-$250 range that prevailed from 2018 to mid-2021.
Unlike iron ore, which is dominated by China gobbling up more than 70 percent of global seaborne volumes, coking coal is a more evenly-spread market with demand centers in both the developed countries of North Asia and the developing nations of South Asia.
It’s likely that much of the increase in prices in coking coal in recent years is down to increased demand from India, which has seen imports rise from 53.32 million tons in 2020 to 70.49 million in 2023, according to data compiled by commodity analysts Kpler.
Australia remains the biggest supplier to India, with imports in 2023 coming in at 41.0 million tons, down slightly from 43.22 million the prior year.
It’s worth noting that India has turned to Russian coking coal since Moscow’s war on Ukraine, snapping up discounted cargoes that can no longer go to Europe because of sanctions against Russia.
India’s imports of Russian metallurgical coal rose to 11.76 million tons in 2023, almost double the 6.07 million the previous year and four times the 2.63 million from 2021.
China’s imports of seaborne coking coal also rose in 2023, reaching 36.8 million tons, up from 27.05 million the previous year.
