Coking coal price ends 2016 with sharp drop

While the price of futures trading in China and Singapore were swinging wildly in recent weeks, the benchmark for the seaborne market underwent a more measured correction after spending much of November above $300.

But now it seems the correction is turning into a rout and the multi-year high of $308.80 for PHCC (Australia free-on-board premium hard coking coal tracked by the Steel Index) may have been the peak.

On Friday the price dropped 5.1% to $226 0 a tonne, the lowest since October 13 and one of the biggest declines on record. In 2011 floods in key export region in Queensland saw the coking coal price touch an all-time high $335 a tonne.

Still, the steelmaking raw material is up 178% in value in 2016 and quarterly contract negotiations between producers and steelmakers could turn out to be the best indicator of where coking coal is heading.

In a recent report TSI said the the low volatility seen in the spot market (the price hovered at its high for nearly three weeks) was a sign that going into quarterly negotiations Japanese steel mills were “wary of making panic buys during this period in order to avoid pushing the indices higher”.

There was a more than $100 differential between the spot price average and the fourth quarter contract benchmark. For Q1 contracts, that gap would’ve all but closed.

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