|Coal experts and economists remain optimistic about the steelmaking coal prices as it experienced a moderate recovery after the prices dropped to $130/tonne in July / Photo by: Inna67895 via Wikimedia Commons|
Coal experts and economists remain optimistic about the steelmaking coal prices as it experienced a moderate recovery after the prices dropped to $130/tonne in July.
Understanding Steelmaking Coal
There are various types of coal, depending on the amount of moisture present, calorific value, and carbon content. Steelmaking coal, also known as metallurgical coal or coking coal, is higher grade coal and is an important component in the chemical reactions that transform iron into steel. Steelmaking coal is not the same as thermal coal, which does not produce coke (essential fuel) when heated. This is why the two types of coal vary in prices as they have different end-uses. The metallurgical coal is mainly used in steel production while thermal coal is in power generation.
According to a report published by Canada-based news provider the Free Press, when prices of steelmaking coal dropped in July, it sparked layoff news in Canadian metals and mining company Teck Resources. The mining company is one of the largest producers of steelmaking coal in North America. Its six operating coal mines alone produced a total of 26.2 million tonnes of steelmaking coal last year.
However, after coal experts and economists cautiously evaluated the economy of China, they expressed their confidence about the price of steelmaking coal. China is one of the three countries, including Canada and the United States, that serve as the key indicator for the steelmaking coal market. The steel production of these three countries increased from an estimated 160 million tonnes in 1990 to 760 million tonnes in 2008, based on the data provided by Statistics Canada. At the start of a worldwide economic downturn in 2008, the yearly steel production averaged at 725 million tonnes.
Why the Steelmaking Coal Price Dropped
Among the steelmaking coal experts mentioned by the Free Press was global energy and chemicals company Wood Mackenzie’s principal analyst in coal research Tony Knutson. He said that the drop in the steelmaking coal price this year was largely attributed to the import restrictions in China.
Knutson explained that the Chinese previously kept the price of the steelmaking coal high to support their local market. The price began to drop in May and then it bottomed-out (the lowest point before the beginning of improvement) in September. It happened because of the restrictions in import instituted by the Chinese government.
|Steelmaking coal, also known as metallurgical coal or coking coal, is higher grade coal and is an important component in the chemical reactions that transform iron into steel / Photo by: oatsy40 via Flickr|
Other Factors That Affect the Steelmaking Coal Prices
Other factors affect steelmaking prices, according to Knutson. These include Brexit or the UK’s withdrawal from the European Union, a downturn in the demand for global steel, and the trade war between the US and China. The coal expert also mentioned the rainy season in India and June as the financial year-end in Australia. Both India and Australia are also dominant producers of steelmaking coal, thus affecting the prices.
Knutson said he is expecting a “small recovery” for the industry for the price of $160/tonne or higher. He believes that these are still “good prices” than the $87 price in 2015.
Canadian steelmaking coal company North Coal’s President John Pumphrey likewise mentioned that there is a slowdown in the steel production in Brazil and Europe and an oversupply of coal from Australia. He believes that there will be a “long term increase in the demand for steel.” Knutson shares the same thought. He opined that the world needs coal for the long term. India will most probably be the biggest consumer of coal moving forward, he forecasted. Steelmaking coal alternatives are also still in their early stages. In Sweden, for instance, they are planning to use hydrogen to build a pilot plant.
|Other factors affect steelmaking prices, according to Knutson. These include Brexit or the UK’s withdrawal from the European Union, a downturn in the demand for global steel, and the trade war between the US and China / Photo by: Jean Beaufort via Needpix|
the Organization for Economic Co-operation and Development, an intergovernmental economic organization with 36 member countries founded to stimulate economic progress and world trade, said that the steelmaking capacity of India in 2018 was at 128.1 based on nominal crude. Nominal prices measure the dollar value at the time it was produced.
Countries with high nominal crude steelmaking capacity include China (1,023.4), Japan (128.1), India, United States (112.6), Korea (87.9), Russia (84.5), Germany (51.9), and Brazil (50.7). Based on OECD’s summary of global capacity developments, steelmaking capacity declined to 2,233.7 million metric tonnes in 2018. However, the investment projects taking place from different parts of the world could increase the steelmaking capacity by 4 to 5 percent between 2019 and 2021. This would amount to an additional capacity from 88 to 110 million tonnes during the said period.
Coal mining in the US alone directly employs 134,000 people. An additional 3.5 jobs are created elsewhere in the economy for every single coal mining job. The National Mining Association forecasts that 50,000 new employees will be needed in the coal mining industry for the next decade to meet the increasing demand and replace the workers who will be retiring. Additional employment data was based on a nonprofit corporation dedicated to the promotion of western coal through education RMCMI.
Steel has had a major influence on the world and the people -- the buildings we work in, the cars we drive, and the homes we reside in. The backbone of developed countries was even laid on the inherent uses and strength of steel. It is expected that the rise in its demand can lead to more job opportunities, too.