Met Coal Prices to Stay Subdued

Metallurgical coal and iron ore prices were the topic of conversation in a call hosted by Bank of America Merrill Lynch and Platts earlier today. Met coal prices have been on a downward trend with a 10 percent correction in just the last two weeks and are currently at the lowest level since 2007. Lower demand in China along with oversupply has pressured met coal pricing. Platts said buyers are refusing fixed costs in favor of falling spot prices which may undercut miners’ benchmark pricing. There has been little evidence that Australian mines are willing to constrain supply and are instead increasing production to cut costs per ton. Likewise, China has increased lower cost domestic volumes while idling higher costs mines.

Benchmark met coal settlement for Q2 is expected to be in the mid-$120/t range and occur sometime before April, according to Julien Hall, Platt’s Managing Editor, met coal/raw materials. Australia’s largest coal producer, BHP Billiton Mitsubishi Alliance (BMA), has offered April HCC at $130/t but Japanese buyers are targeting pricing in the low $120/t. Platts does not see any signs of production cuts for met coal.