This five-part story series examines the coking coal market from a few angles. This first part focuses on pricing evolution and spot liquidity. The second analyzes how trade flows have changed, the third traces the rising importance of environment, social and governance criteria, while the fourth takes a deep dive into the workings of coal trading platforms that may inform spot price assessments. The final part examines the current state of the spot market and explores directions for future evolution.
Shifts in the way a commodity is priced often result from major economic and world events and coking coal is no exception, having witnessed the pricing mechanism for long-term contracts move from annual negotiations toward spot-linked pricing over 2010-2012 as spot prices crashed due to a sovereign debt crisis in Europe, a shaky US recovery from the 2008 global financial crisis and China's sagging under the weight of ballooning domestic steel capacity.
While earlier annual benchmark negotiations were led mainly by major steelmakers in Japan and Europe, Chinese steelmakers had an increasing say through their activity in spot markets as growing steel capacity fueled their appetite for coking coal imports.
More than a decade on, the coking coal market has not looked back on its price indexation journey, although a new set of events – the pandemic, China's unofficial ban on Australian coal, erratic weather and the Russia-Ukraine war – may see a change of guard in terms of spot market activity, chiefly by India and Russia.
