Steel, coking coal price trend diverges

Kolkata: There is an apparent decoupling between coking coal and steel prices in the recent past. While steel prices have weakened from the CY 2018 highs, thanks mostly to an increasing trade tensions and a slower pace of global economic growth, coking coal prices have not followed suit. In fact, they remained at elevated levels, nibbling at the margins of steelmakers. However, if what the latest ICRA report is anything to go by, this apparent decoupling is not likely to sustain over a longer timeframe.

At prevailing prices, some large global coking coal miners are achieving Ebitda ranging from $70-100/MT of coal sold which comes close to the Ebitda levels achieved by some large integrated global steel players. Supported by the high profit levels of miners, capital spending in expansion projects is expected to pick-up.

"A natural corollary of high coal prices is supply response from miners. We have seen this happen in CY2018, when Australian coking coal exports increased year on year by 5 million tonne, supported by buoyant steel and coking coal prices. This trend of rising exports from Australia is likely to continue in CY2019 as well. We expect coking coal supplies from some of the major exporting nations like Australia, Indonesia, Mozambique, South Africa, and Canada to increase by over 10 million tonne in CY2019," said Jayanta Roy, Senior VP and Group Head - Corporate Sector Ratings, ICRA.