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Coking Coal Price May Stabilize

China's coking coal export free on board (FOB) price is expected to hover around US$250 to US$300 per ton for 2005, with no striking fluctuations foreseeable.

The prediction was made by Han Yong, a coking coal industry analyst with Shanghai-based China Securities, in an interview with China Daily.

The Ministry of Commerce fixed an export quota of 14 million tons of coking coke for 2005 in early November, and granted licenses to 48 manufacturing and trade companies for dealing coking coal exports earlier this month.

An exporting price of less than US$300 is able to balance China's coking coal production cost and meet international market demands, Han said.

"China's coking coal exports are expected to suffice demands from the international market, including Europe and the United States, so the roughly balanced supply and demand would not project major price shake-ups in the international coking coal market," Han said.

Han made the remarks against the dramatic fluctuations in coking coal export prices this year.

According to the industry estimate, China's coking coal production capacity is expected to top 350 million tons in 2005, up 110 million tons from this year.

China is expected to continue its dominant position in the international coking coal market in 2005, which will see a slight decline of the world's coking coal trade volume to 24 million tons from 2003's 25 million tons, a Xinhua report said.

China's coking coal exports play a significant role in meeting international market demand, industry statistics show.

The world's total turnover of crude steel reached 854 million tons, and crude iron hit 585 million tons for the first 10 months of the year, respectively up 8.9 percent and 8.6 percent year-on-year, which fueled a proliferating increase for coking coal supply, according to China National Coal Group Corp (CNCGC).

The Chinese Government set a quota of 9 million tons for 2004's coking coal export at the beginning of the year, a sharp drop of 33 percent from 2003, CNCGC said.

The FOB price, as a result of supply shortfalls, skyrocketed to US$450 per ton in May, a CNCGC official said. The surging coking coal price on the international market, consequently, provoked complaints from countries that rely on coking coal exports, including the European Union (EU), the United States, Japan and India.

Responding to the discontentment, China added another 4 million tons of coking coal for export in July, followed by a plummeting FOB price to US$210 per ton, which rebounded to between US$240 to US$250 in October when the market roughly balanced, according to CNCGC sources.

The Ministry of Commerce's move to grant licenses to 48 manufacturing and trade companies for dealing coking coal exports helps establish a transparent export mechanism, Han said.

"Defining specific companies for trading coking coal in the international market is conducive to avoiding illegal deals when companies try to receive a coking coal export licence," Han said.

In previous years, companies tried every means possible to obtain an export licence, even by offering to buy the licence at a high price, while overlooking the company's qualification, which disturbed the normal market order, Han said.

Experts also argue that China should reduce coking coal exports and concentrate more supply on the increasing domestic market demands, by highlighting the importance of saving the unrenewable energy resource and warning of the threat of environment pollution through the mass production of coking coal.

(China Daily December 28, 2004)

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