Posco Approves a 200% Price Hike for Coking Coal: Will Thermal Coal Be Next?
It's starting to feel a lot like fertilizer around here, with this metallurgical coal price situation... wow! I guess the ArcelorMittal (MT) CEO was accurate last week [ArcelorMittal Sees Metallurgical Coal Prices Rising 150-200%]. Posco (PKX), a South Korean steel giant, Monday agreed to a 205-210% increase in coking coal. Tremendous. I was hoping Massey Energy (MEE) would fall off a cliff with the Arch Coal (ACI) news, but it did not even go negative on the day.
Bummer. Now I have to wait for Barron's to tell me about the death of commodities again so I can rebuild my position there. Because remember, when the US domestic economy slows down the whole rest of the world shuts down... or so thats what the pundits tell me. In addition to Bernanke who pledges that inflation will go away in the 2nd half of 2008. Remember everyone, play the Lotto in 2nd half 2008 - it will be a time of good fortune, mermaids, and unicorns - we'll all be rich as employment ramps up, inflation dies, real wages skyrocket, home prices rebound, credit becomes easy to get, earnings rebound... all in "6 months".
And remember, almost every coal company has some exposure to metallurgical coal. And if you read the last paragraph, it looks like thermal coal is also set to see a large increase. All good... unless your a consumer. But don't worry CPI will tell you energy went up 3% again this year.- Steel prices are poised to rise further after an Asia steelmaker yesterday agreed to a tripling in price of its supply of coking coal in a settlement that is likely to set the benchmark for the steelmaking industry.
- South Korean steelmaker Posco said it had accepted a 205-210 per cent rise for its supplies from Australian miners.
- Analysts said that the agreement was likely to be followed by other steelmakers in the region and in Europe, resulting in higher inflation in emerging economies.
- The increase in the cost of coking coal as set by the Posco settlement was larger than the level expected by the market and the industry and comes on top of a 65-71 per cent rise in iron ore prices this year. Iron ore and coking coal are the two main expenditures for the steelmaking industry.
- Analysts said that steel prices might need to rise up to 20 per cent to cover the jump in coking coal cost. (no inflation there!)
- Steelmakers raised the prices of their products 10-20 per cent in February and March after the cost of iron ore went up.
- Alan Heap, commodities analyst at Citigroup in Sydney, said that the coal markets had tightened further as a result of production losses in Queensland and reduced Chinese and South African exports.
- "We now expect coking coal contract prices to be set at $285 a tonne," Mr Heap said. That compares with current prices of about $85 a tonne.
- Spot transactions of coking coal have reached up to $375 a tonne for premium Australian coal, according to Mr Heap. He added that some steelmakers had purchased significant volumes of spot coking coal from US suppliers at very high prices, highlighting the degree of supply shortage in the industry.
- The increase in coking coal prices is likely to be replicated in thermal coal for power plants, with Australian miners seeking to double the prices to about $110-$125 a tonne, according to brokers and analysts.
We talked about the implications of South Africa/Chinese shutdowns when they happened [Jan 27: China Has a Power Shortage; South Africa Has a Power Shortage] - but the biggest storm in half a cenutry in China got almost no attention stateside because all that matters to American investors is... America. If it doesn't happen here, it doesn't matter... and keep repeating to self "when the US is slowing down, every commodity must die because only the US matters". [A Long Term View on Commodities] They'll see...
Related Articles
|
Top Rated Comment Streams:
-
1.Hedged In662
- 2.
-
3.Smarty_Pants422
-
4.axelrod608325
-
5.cos1000274
- Free E-Newsletters
- About Seeking Alpha
- About Us
- Contact Us
- What's New
- Readers Feedback
- Advertise With Us
- Contributors
- Contribute an Article
- Feature Your Book
- Our Contributors
- Anonymous Contributions
- Dispute an Article?
- Legal
- Terms of Use
- Privacy
- Copyright
This article has 1 comment:
-
User 160313
-
4 Comments
Apr 08 04:32 PMR