Platts starts world's 1st daily metallurgical coal price index

The market for coking coal, an important input for steel making, has been tightening on supply concerns from Australian mines. Spot prices are being quoted at $216 a tonne, compared to $180 in July 2009.

In addition, for the first time, a major supplier and buyer concluded a contract on a quarterly basis instead of the usual yearly one — BHP, the Australian mining company and the world’s largest, has just signed one with Japanese steel mills. Industry sources say BHP offered two options, an annual contract at $250 a tonne (last year’s contract was at just $129 a tonne) and a quarterly one at $200 a tonne. The Japanese mills chose the latter.

“The coking coal market has been tightening, as there are some supply-side issues in Australia (a big exporter),” James O’Connell, managing editor of Platts’ International Coal told Business Standard. At Newcastle port in eastern Australia, a docking centre for exports, there has been a queueing of vessels.

That apart, industry observers say more volatility in coking coal prices and frequency of contracts (monthly, quarterly, etc instead of yearly) would increase. Platts, the leading global information provider on energy and metals, has just launched the world’s first daily metallurgical coal assessment index. The index would reflect two assessments, of hard coking coal loading in Australia for any destination and that delivered into China from any port (China being a major importer of inputs for steel making).

“The new daily assessments (index) address miners’ and steel mills’ needs for an independent daily spot assessment in the burgeoning Asian market, to better determine pricing for short-term and long-term contracts,” said O’Connell.

When Platts introduced its daily price index for thermal coal over three years earlier, the spot market in the product was less then five per cent of the total size. Now, 20 per cent of the trades in thermal coal take place on the daily spot market. This shift is expected to take place in coking coal, too; till now, only about five per cent of coking coal volumes were being tied up from spot markets. This is expected to change, with the rise and volatility in prices.