LONDON, Oct 21 (Reuters) – While no steel maker will be happy with the explosion in coking coal prices, Chinese mills are the best placed to deal with the impact, given they are nowhere near as exposed to spot prices as competitors in the rest of Asia and Europe.
The spot price of premium hard coking coal <_.PHCC-AUSSI> in Australia, which dominates global exports, surged to $242.90 a tonne on Oct. 20, taking the rally so far this year to a staggering 210 percent.
While only a small percentage of coking coal cargoes are actually sold at the spot price, the quarterly contract price was recently settled above $200 a tonne and customers of Australia’s BHP-Mitsubishi Alliance, the world’s largest coking coal exporter, will be paying prices linked to monthly indexes.
Given that about 770 kg of coking coal is required to make one tonne of steel, the more than tripling of prices since this year’s rally took off in July will be causing pain for steelmakers, who have not enjoyed nearly as large gains in their products.
However, given Chinese steel makers are far less reliant of seaborne imports than those in Japan, South Korea and Britain for example, their competitive advantage has been increasing. While domestic Chinese coking coal prices have been rising, they are still well below the seaborne equivalents.
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