During last year’s negotiations for the Japanese financial year, beginning April 1, the price for coking coal reached $US125 a tonne as supply and demand got increasingly out of kilter.
The 120% leap was partly responsible for kick-starting a global resurgence in coal mine development and has added an estimated 12 million tonnes of coking coal supply onto a market that traditionally only grew by 5Mt.
A Bloomberg News survey of nine analysts suggested major coking coal producers may have to take a 4% price drop as increased supplies come on-stream and steel production is trimmed back.
According to Bloomberg’s research, analysts expect coking coal prices to settle anywhere from $US108 per tonne to over $US125/t.
Commodity forecaster the Australian Bureau of Agricultural and Resource Economics predicted global coking coal exports will rise to 215.8Mt, up 3.6%, while Australia’s exports are expected to rise another 5.4% in 2006.
On the back of this the value of Australia's coking coal exports are expected to hit $A17.6 billion in 2005-06, from just $A6.5 billion in 2003-04, ABARE said.
While coking coal exports are expected to rise, growth in steel production is slowing and high coal inventories may culminate in steel producers pushing for lower prices.
According to Bloomberg, Nippon Steel Corp and Mittal Steel have cut back production after being flooded with Chinese steel.
According to the Tex Report, Fording Canadian Coal Trust's Elk Valley Coal Partnership and BHP Billiton each start separate price negotiations with steelmakers this week.
Prices for non-premium coal types are expected to drop further, with products like semi-soft coking coal expected to fall steeply.