Coking Coal Futures On Fire! in Commodity News 25/02/2017 [IMG]...

Coking Coal Futures On Fire!

in Commodity News 25/02/2017


Coking coal futures have reached an inflection point and investors and physical market trad− ers alike are waking up to the potential for hedging and trading in a market that contin− ues to show impressive growth.
The 5bn tonnes of futures traded on the Da− lian Exchange’s coking coal contract in 2016 have already had far−reaching effects on do− mestic physical trade. More and more players are now recognizing the need to pay atten− tion to coking coal futures and apply a more technical approach to analysing price action in the physical market. Along with the successful iron ore futures contracts, the raw material inputs for steel finally have risk management tools in place to manage the volatility in the ferrous industry.

In turn, this is having a ripple effect on the rest of the global market. Driven by a more volatile trading landscape for commodities, we are already seeing a surge of physical par− ticipants seeking to hedge their exposure in the off−shore futures markets such as the Singapore Exchange (SGX).
Coking coal prices almost quadrupled last year smashing through the $300ƒt level, they have since retracted 50% and now we are seeing a fresh rebound as fears of re− newed Chinese mining curbs and North Korean export ban effects lift bearish senti− ment amid a period of strong steelmakers margins. This clearly reemphasizes the mar− ket’s volatility and continued directional uncertainty while the quarterly benchmark pricing systems seem to be in its final days. In conclusion the market is undergoing rap− id change and a futures market brings some certainty during periods of extreme flux.

International volumes on The Steel Index (TSI) Premium Hard coking coal FOB Austral− ia contract at the Singapore Exchange have already traded 50% of last year’s total fu− tures market in less than two months – the equivalent to a 1,000% increase year−to− date. February is already a record month for total volume cleared.
FIS has long argued that coking coal would follow the footsteps of iron ore into a large and liquid futures market. This is not a mat− ter of if or when coking coal futures start to make their influence felt on the physical market − the time is now.
Source: Freight Investor Services (FIS)


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