Australian producers are set to benefit from increased pricing and restricted supply of coking coal due to the Russia-Ukraine war and EU ban on Russian coal imports effective from August, says Moody’s.
Russia was expected to be a source of supply growth for metallurgical coal over the coming years and the market was already experiencing record prices before the war in Ukraine. These record prices largely reflected weather-related supply problems in Australia and Canada, at a time when global steel production was rebounding, Moody’s observes.
“While we expect supply from these nations will normalise over time, the potential for reduced exports from Russia has caused prices to surge,” the credit rating agency says in a report sent to Kallanish. “We now expect them to remain elevated, even after supply rebounds from Australia and Canada.”
The Australian hard coking coal price index peaked at around $670/tonne fob during March, compared with around $120/t in March 2021. While prices have declined in recent weeks from record highs, they remain above Moody’s price assumption for the next 12 months of $275/t.
In the US, meanwhile, some coking coal producers will also benefit from higher prices. High international thermal and metallurgical coal prices not only drive a favourable export environment, but also affect the domestic supply and demand balance by driving up domestic prices. However, only those miners with better access to global markets through the Eastern shipping ports stand likely to benefit, Moody’s concludes.
Adam Smith Germany