Increased North American exports to Asian markets has seen prices of lower-ranked coals such as semi-soft and PCI suffer more than high grade coking coals because of the excess supply in the market, it said in a report.
The spot FOB price for low volatile PCI has dropped below $150 per tonne FOB, meanwhile semi-soft coking coal has dropped to US$115/t FOB.
“Austar has historically produced a benchmark semi-hard coking coal with relatively high sulphur,” Foster said.
“As Asian steelmakers began to replace low sulphur coal from Queensland with high sulphur coal from North America, the Austar coal was displaced from the market as it was no longer demanded by the steelmakers to use as a blend coal.
“This has resulted in Austar coal being sold as an energy adjusted premium thermal coal.”
Longwall panels at Austar are designed to extract up to 220m wide, 1300m long and the full height of the seam. They range in depth from 400m to 530m below the surface. In 2011 it produced 1.9Mt of coal.
Falling freight rates have been one of the factors that have made North American metallurgical and thermal coal more competitive in Far East and Indian coal markets, while Mongolian coal, though landlocked, is ideally located to supply some major Chinese markets, according to Foster.
On freight, the largest type of vessel, Capesize, recently slumped below $US4,000/day.
“Monthly Chinese coking coal imports indicate that both Australian and Canadian coking coal is being displaced by Mongolian coking coal,” Foster said. “And Chinese customers who have made the switch to Mongolian coals currently have little incentive to switch back to Australian coking coal.”
