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Metallurgical coal: The commodity world’s ‘Quiet Performer’

IFM_Metallurgical Coal
The price of Australian metallurgical coal, also known as 'Coking Coal', on the Singapore Exchange ended at USD 315 a metric ton on February 21

There has been a new “Quiet Performer” in the energy commodity space in recent months, named metallurgical coal.

As of February 2024, Australia is dominating 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 USD 315 a metric ton on February 21.

“The contracts, which are linked to the free-on-board price in Australia, have risen 40.3% since the 2023 low of USD 224.50 a ton on July 6. In contrast, high-grade Australian thermal coal is only 0.5% higher than its 2023 low, while Brent crude oil has risen 13.4% from its low in December, and spot liquefied natural gas is down 2.2% from the weakest it was in 2023,” remarked a Reuters report.

“While the price is well below the record USD 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 USD 100-250 range that prevailed from 2018 to mid-2021,” it added further.

Unlike iron ore, which is dominated by China (as the country covers 70% of the global seaborne volumes), coking coal has become a more evenly spread market with demand centres rising in both the developed and developing parts of Asia.

In fact, reports suggest that India’s JSW Steel is in talks with Australian miner Whitehaven Coal for a stake in its Blackwater metallurgical coal mine. JSW Steel, India’s largest steel producer by capacity, as of February 2024, was conducting due diligence and expected to get a coking coal sample from the mine to check specifications. Whitehaven Coal was reportedly exploring a potential sell-down of about 20% of Blackwater to global steel producers as strategic joint venture partners.

Whitehaven Coal acquired the Blackwater and Daunia mines from BHP Group in a USD 4.1 billion deal in October 2023, and expects the acquisition to complete by April 2024. As per the reports, JSW Steel could consider acquiring more than a 20% stake in Blackwater.

“JSW has held initial talks with Blackwater but has yet to see the specifications of the coking coal from the metallurgical coal mine in Australia,” Reuters stated further.

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