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Hi Mondy

The two types of coal are greatly different in terms of their niche application. Met coal is basically cooked in an oven (coking plant) to produce coke , a crystalline form of pure carbon which is then added to a blast furnace to increase its temperature ( ie to circa 1800 degrees) to help liberate iron metal from iron oxide and the oxygen given off combines with the carbon in the coke to give off Co2. Its a form chemical "reduction" process that happens in the steel making process.

PCI Coal is the most common met coal where some discussion around swapping it over to a potential thermal applications is often discussed. Ordinarily met coal ( specifically hard coking coal and semi soft coking coal grades) as it is much more rare geologically compared to lower cal thermal coal , trades at a significant premium hence this current moment in time where this is not the case is exceedingly rare. PCI is the lowest grade of met coal but mostly it too has traded above thermal coal over last 20 years although there have been periods where this hasn't been the case (circa 2014) , mainly when PCI demand was very low in China and caused a PCI glut globally.

PCI is likely to be the first form of met coal phased out in the change over to Green steelmaking using Hydrogen ( but I think much more likely in the mid to late 2030's not anytime soon) . PCI is often used as a replacement for Coke in the steel making process and many mills often use a blend of pure coke and PCI to lower the overall cost.

The problem in using PCI to swap between the two applications ( met vs thermal) is PCI has very low volatile matter ( less than 25%), so it doesn't combust well relative to thermal coals . <25 % is considered too low for most coal-fired boilers in Asia which need 25%-40%.The presence of low-VM material can result in high unburnt carbon-in-ash content due to poor stability and burnout rates.A boiler's capacity to use lower VM coals depends on its design and its fixed carbon fuel formula. But most boilers in Asia are ill-equipped to handle low-VM coals, with the exception of a few in South Korea and Vietnam from bits I have read .

There is ways around the problem for use in thermal applications but often again it involves blending PCI with other thermal coals and then the plant using the blend has to be set up correctly to use it. Hence instances are far and few, with market participants can readily swap between the two. Again if there's too much low VM in the boiler you will have poor boil-out causing ash disposal issue . Furthermore, some boilers in more advanced plants ie Japan with more stringent standards on coal quality would demand a compensation for lower VM material.

So you can see this topic becomes quite complex quite quickly such that the markets (thermal vs met) usually by most analysts are treated as discrete and not interchangeable. That's not to say there hasn't been a high correlation between the two markets/prices in recent years, given an under investment in exploration and development of both forms of coal resources globally and both forms were heavily supplied by Russia into global markets pre the Ukraine war.

Pf