Coking Coal Spot Price

http://edge.alluremedia.com.au/uploads/*/2016/09/Premium-coking-coal-FOB-Dalrymple-Sept-2016.jpgBUSINESS INSIDER 7th SEPT
Coking coal prices are exploding higher, as seen the chart below.

Enormous. If you stare too long you may need a neck brace.

Since hitting a multi-year nadir in early February, Metal Bulletin’s premium coking coal index has gone ballistic, more than doubling in price.

From the start of August, it’s put on more than 60% alone.
According to Vivek Dhar, a mining and energy analyst at the Commonwealth Bank, the huge jump in spot prices continues to reflect a lift in Chinese steel production and supply disruptions, both in China and in seaborne markets.
“China’s coking coal imports fell by 33% y/y to 4.5 million tonnes in July,” he wrote on Wednesday.
“The slump in coking coal imports in July is not indicative of a weaker demand environment, particularly given the material increase in coking coal prices in the last month.
“A domestic shortage of coking coal has helped drive seaborne prices higher recently, reflecting the weather-related closure of key coal transport routes in China. Seaborne export markets have also been constrained with operational issues at mines in Australia and Mozambique,” he adds.
Looking ahead, Dhar expects the weakness in Chinese coking coal imports to reverse in August and September to “reflect the current supply-demand dynamics”.
After such a phenomenal run for spot prices, the question now is how long, and by how far, prices can continue to surge.
Perhaps hinting that supply disruptions are starting to ease, coking coal futures traded on the Dalian Commodities Exchange have tumbled on Wednesday, currently sitting down 4.76% at 1,210 yuan.
Like spot prices, the January 2017 contract has doubled in value from the lows seen earlier this year.

WLC EXPECTED TO SHIP 1.2m Tonnes in the next 12 months. With MC currently at 93m, and coking coal around USD200/MT (AUD260) - thats over $300m in revenue.



Of course there are production costs etc etc, however they are lower than comparable mines. Of course WLC are carrying a fair bit of debt, but remember this is effectively being covered by Jindal. Jindal have of course some issues themselves

....the following from the Time of India last week..

While the company has been forced to call off all possible expansion after pumping in money to get the second phase of the Angul plant going, it is not looking to sell core assets, including the two coking coal mines overseas. At the same time, it is looking to close the deal with Sajjan Jindal's JSW Steel quickly as several bankers expressed apprehensions about the two-year process to close the transaction being "too long".

"We are in the process of finalising the power purchase agreements and tying up coal supplies. We will do it earlier than envisaged," said a source who did not wish to be identified. JSPL is selling its 1,000-MW Chhattisgarh plant to JSW Steel for Rs 6,500 crore if fuel supply and power purchase are finalised.

So it would appear that Jindal can see that as long as they are able to source coking coal from their own mines, and achieve cost cutting within it's Indian operation, the future of WLC looks rather better than a year ago.

Some may see the recent surge in coking coal prices as a 'bubble' i don't concur, as the January 17 future price is at current levels.

So this is certainly a commodity and company that is in the right place at the moment and happy to hold.