Coking Coal - Calum Baker, CRU Analysis
■ Mr. Baker predicted that metallurgical coal contract prices will reach US$
155/tonne FOB for the 2008 coal year and those contracts are expected to
settle as early as this month. Spot market prices were reported at record levels
in 2007, reaching as high as $180/tonne in December.
■ Strong growth in the global steel market, particularly in China, has stimulated demand
for metallurgical coal. While China has historically acted as a net exporter of coal, strong
demand growth has required the country to rely on imports since 2004. In the longer term,
India and Brazil will also drive demand, as neither country has domestic coking coal
resources. Mr. Baker estimates that an additional 170 million tonnes of coking coal will be
required by 2012.
■ Logistics and infrastructure bottlenecks continue to limit supply. Australia is
aggressively increasing capacity at several of its ports, but the capacity will remain tight as
new mine expansions increase seaborne coal supply.
■ Australia is expected to remain the dominant supplier of coking coal. Australia currently
enjoys greater than 50% share of the global seaborne coking coal market, which Mr. Baker
expects will be sustained in the medium- and long-term. New sources of supply from
Indonesia, Mozambique, and Mongolia will replace U.S. and Polish exports which are
expected to be limited as reserves in these countries are depleted.
■ Scotia Capital Comment - Mr. Baker's comments align with our expectations of an early
coking coal contract settlement in January or February 2008. Our $140/tonne price outlook
is somewhat more conservative than Mr. Baker's view.