Australia to tighten grip on coking coal as U.S. rivals suffer

Oct 22 Australia is set to boost its dominance of the global trade in steel-making coal, as cost cutting and better margins due to a slide in the local dollar stoke a rise in production and put pressure on U.S. rivals to cut output.

Top exporter BHP Billiton , which along with Japanese partners Mitsubishi Corp and Mitsui & Co supplies nearly a quarter of globally traded coking coal, will be the biggest beneficiary.

“As China’s import flows stabilise and higher-cost North American production exits, BHP Billiton will be left as the dominant price-setting player on the supply side,” Morgan Stanley analysts Tom Price and Joel Crane said in a note.

Commodity prices have plunged over the past three years as demand in China has dropped, and the two key steel-making ingredients, coking coal and iron ore, have suffered the most.

Coking coal prices have tumbled 75 percent from a peak of $330 a tonne in 2011, mainly due to a near one-third increase in Australia’s exports from new mines that were approved at the height of China’s demand boom.

Steel demand has since fallen off in China and Japan as growth has slowed and the Chinese property market has softened.


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