.jpg)
6 hours ago
1
Article content
Miners and bankers alike have long argued it’s crucial to maintain support for metallurgical coal as few steelmakers have widely available or cheap alternatives to processes that require fossil fuels, and because their products are required for use in everything from power grids to wind turbines.
Article content
“Steelmaking coal is recognized as a critical mineral in many countries,” Gary Nagle, chief executive officer of Glencore Plc, one of the world’s largest miners and traders of the commodity, told investors in February. “It’s recognized that this is needed for the transition, so steelmaking coal is in a completely different category to energy coal.”
Article content
Roughly 1.5 billion tons a year of coal is traded globally — about three-quarters of which is for power plants, according to government estimates in Australia, the top shipper of metallurgical products and second only to Indonesia for thermal categories. Semi-soft coking coal can comprise as much as about 20% of the total metallurgical market, said S&P Global Commodity Insights analyst Paul Bartholomew.
Article content
Metallurgical coal has typically commanded a premium over material bound for power stations, though for some types of products those prices have recently been almost identical.
Article content
Article content
If power-sector coal prices are more lucrative, or if steel demand weakens further, more than a third of Australia’s exports of semi-soft coal could be diverted to thermal markets this year, said Matt Anderson, director of research and consulting at Brisbane-based Commodity Insights Pty. Australia exports about 24 million tons of the material a year, according to the firm’s estimates.
Article content
Miners acknowledge they have an ability to switch some products between markets. “This is just an economic question” for specific types of semi-soft material, Whitehaven CEO Paul Flynn said on a February earnings call. Whitehaven declined to comment further.
Article content
Ascribing precise definitions to categories of coal doesn’t necessarily reflect a real-world reality that’s “all about shades of gray,” said Nick Stansbury, head of climate solutions at Legal & General and previously head of commodity research.
Article content
Since August, the spread between benchmark prices of semi-soft coking and thermal coal has narrowed — and the products have regularly traded within a $10 band per ton, according to data providers globalCOAL and Platts, S&P Global Commodity Insights. Semi-soft rates slipped in May to roughly $3 less than some thermal products.
Article content
Article content
Because thermal markets factor in the calorific value of coal, prized because it determines the amount of heat released during combustion, sellers have recently been able to achieve a higher price for semi-soft cargoes from power producers than from steelmakers, the traders said.
Article content
That’s potentially attractive for miners struggling with squeezed margins. In Queensland, as much as 30% of metallurgical coal production is currently unprofitable, according to Stuart Bocking, CEO of Coal Australia, an industry advocacy body.
Article content
Major banks, and in particular US lenders, are already reviewing the restrictions they’ve introduced on fossil fuel projects, and preparing to increase activity in the oil, gas and coal sectors, people familiar with the discussions said in April.
Article content
Curbs on coal already can vary widely. Some prevent funding for thermal coal mines, while other policies take a threshold approach and exclude companies that generate more than a certain percentage of revenue from the commodity, or produce more than a specific volume.
Article content
Ambiguity over the switching of some metallurgical coal cargoes to power markets can further diminish the impact of the policies, said Yann Louvel, senior financial institutions policy analyst at Reclaim Finance. “Loopholes can make financial institutions’ commitments meaningless.”
English (US)