Ahead of his presentation at the much-anticipated Eurocoke Summit 2017, we spoke with Jim Truman, Director - Global Metallurgical Coal Markets at Wood Mackenzie about his view on the recent volatile metallurgical coal price ride, drivers to changes, implications for a more stable market, significant future shifts in coal, coke and steel and much more.
You are going to be speaking about the recent volatile price ride for metallurgical coal experienced in the US – can you share some of the insights you will exploring?
I’ll be talking about how coal supply has changed, especially over 2016 and how that influenced global prices. Having many mines that lie on the high-cost portion of the supply curve, the US mines have served as the “safety valve”, when the global market tightened. After the mines in Queensland flooded a few years ago, US companies quickly responded and increased shipments to Asian customers who were searching for replacement tonnes. I’ll be examining how the price rise in 2016 compares with that event and the current plans US producers have to increase output, as prices are still well above recent levels.
What do you feel are some of the drivers to these changes and implications for a more stable market?
There were a just few key drivers that influenced the extreme ups and downs in the metallurgical coal market in 2016. The most important was the Chinese governments action to restrict the number of workdays for domestic coal mines. Their reduction from 330 days to 276 workdays per year lowered local production and caused a greater need for imports – both landborne from Mongolia and seaborne. It just happened that this rise in import demand dovetailed with a number of outages at mines in Australia. The call for more coal also came after a few-year period of global mine closures, especially in the US, due to falling prices. So, there wasn’t much supply available and the spot price for Australian low-vol rocketed to over US$300/t.
The turn around came after two key Australian longwall mines, Appin and Grasstree, returned to production in mid- to late-November. Also, the Chinese government eased the workday restriction through Q1 2017. Supply returning on the seaborne side and domestically in China caused prices to begin to fall. By early-February, the spot price for Australian low-vol had dropped to below US$170/t.
What do you see as the likely causes of most significant shifts in coal, coke and steel in the next 12-24 months?
The key for the near term is to watch the production volume being lured back into the market with high prices. There are quite a few expansions in the works for the US and Canada. Australian producers have some increases planned, as well as a very aggressive hope for Mozambique. I think we could very quickly be smothering in coal again and fall back to much lower prices. The wildcard again will be China and their decisions concerning domestic coal output, which adds the risk of more volatility. And we are all watching the fast changes occurring in the US under President Trump and weighing the associated uncertainties.
What are you most looking forward to at Eurocoke Summit 2017 and why do you find it important to attend?
I have a cousin who lives in Dusseldorf, so I am most anxious to see her and have a wurst (kidding, but I will catch up with her). For me, it’s all about the people at the conference. I started attending these in 2006 and guess where --- Dusseldorf. I have made a lot of friendships through these meetings since then and stay in touch during the year.
It nearly goes without saying that the presentations are an excellent way to catch up on the status of the market and advances in technological means to improve coke production – especially as we continue to use up the best coal deposits. I think I’m most looking forward to shaking hands with those people I’ve never met before and hearing their views …. and having a wurst with my cousin.
Jim will be presenting at the Eurocoke Summit on Tuesday 25th April as part of the 'Global outlook for the coal, coke and steel industries' session.
Book your ticket to join her and representatives from ArcelorMittal, ThyssenKrupp, Steel Institute VDeh, US Steel, Siemens Turbomachinery, Bettercoal, Eurofer, Blackrock Energy, CRU, DMT and more now. The standard rate of just €1,099 for a 2-day conference ticket is in place until 13 April 2017.
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