Coal price rally bypassing US miners

Metallurgical coal's dramatic rise this year have caught most observers by surprise and despite predictions of a consolidation price momentum for the commodity seems only to be building. On Wednesday coking coal added another 2.7% trading at $265.50 a tonne bringing one month gains for the steelmaking raw material to more than 24%.

According to data provided by the Steel Index premium Australia hard coking coal prices are up more than three-fold since hitting multi-year lows around $70 a tonne in November last year.

That's an uptick from the first quarter, but less than half the exports racked up when coal was last trading at today's prices

While not quite setting such a torrid pace the rise in the price of seaborne prices for coal used in power generation has been just as impressive more than doubling in 2016 to settle at $114.75 a tonne on Tuesday, a near four-year high.

The rally in seaborne steam coal prices bypassed US miners entirely. In fact, prices for Central Appalachian coal (Nymex FOB) has continued its long-term downtrend. Trading at $40 a short ton, CAP prices are down 7.7% year to date and averaging more than 11% below 2015.

Coal price rally bypassing US miners

Source: BMI Research

Coal from the Powder River basin, (8,800btu/lb) hasn't fared any better, losing 17% since the start of the year to trade at $9 a short ton this week after dipping as low as $8.25 in September.

According to EIA data the US exported a meagre 9 million tonnes of coking and 3.8 million tonnes of steam coal during the second quarter of this year. That's an uptick from the first quarter, but less than half the exports racked up when coal was last trading at today's prices.

The seaborne coal rally was also spurred by supply issues after Beijing’s decision to limit coal mines' operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry. Chinese government stimulus plans which saw steel production and demand for power pick up only added fuel to the fire.

A new report by BMI Research suggest the coal rally may be running out of steam and that thermal coal prices will weaken over 2017 due to both stronger coal mine production and weaker demand growth in China. The researcher, a unit of Fitch, expects fourth quarter 2016 levels to represent the peak of thermal coal prices for the next several quarters.

China imported 24.3 million tonnes of coal in September, up more than 33% compared to last year according to official customs data. Over the first nine months of the year imports increased 15% to 180 million tonnes compared to the same period in 2015.

In 2011 floods in key export region in Queensland saw the coking coal price touch an all-time high $335 a tonne. Steam coal peaked just shy of $140 a tonne in January 2011.