An excavator sift through dunes of low-grade
coal near a coal mine in Pingdingshan, Henan province, China November 5, 2021.
Picture taken November 5, 2021. REUTERS
The
premium of high-grade thermal coal over coking coal in Asia is shrinking as
China's re-opening and ending of a ban on imports from Australia powers a rally
for coking coal, a key steelmaking ingredient.
Singapore-traded
futures linked to the price of Australian coking coal ended at $315.67 a tonne
on Monday, up 21% since the end of last year and 56% higher than the 13-month
low of $203 hit in August last year.
Meanwhile,
futures linked to the price of high-grade Newcastle thermal coal in Australia
ended at $350.95 a tonne on Monday, down 13% from the end of last year and 23%
below the all-time high of $457.80 reached in September last year.
Newcastle
thermal coal futures have traded above coking coal contracts since June 1 last
year - something that had not occurred previously in the history of the two
contracts.
The
surge in prices for thermal coal used predominantly to generate electricity
came in the wake of Russia's invasion of Ukraine, which led to an energy
squeeze as Europe shunned Russian natural gas and coal, and instead sought
alternative supplies. Moscow calls its actions in Ukraine "a special
operation".
At
the same time, coking coal prices weakened as steel production outside China
softened while the global economy simultaneously tried to deal with an energy
crisis and the accompanying surge in inflation.
But
since China's decision to loosen its strict zero-COVID policy and effectively
abandon it this year, market expectations have swung to a rebound in the
world's second-biggest economy, especially in steel-intensive sectors such as
residential and infrastructure construction.