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Metallurgical Coal: Market tightens as contract talks progress

Metallurgical Coal: Market tightens as contract talks progress

Report summary

Metallurgical coal spot prices have mounted a modest recovery since mid-February, and with Q2 contract talks ongoing, the rise has provided a welcome boost to suppliers' ammunition for the negotiations.  Weather-related supply disruption in both China and Australia is an underlying cause.  And, combined with a stronger-than-usual restocking cycle, low freight rates and an appreciating Aussie dollar, FOB spot prices in Asia have risen above US$80/t in early March, at or close to Q1 2016 contract prices. A roll-over in quarterly prices - US$81/t for LV HCC - is now the most likely outcome, although a modest rise is also a distinct possibility, particularly if negotiations drag on. 

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  • Coal supply has tightened
  • Steel restocking has given apparent demand a larger boost than usual
  • Other factors are also supporting price
  • But, market strengthening may be temporary
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