Reuters reported the prices of metallurgical coal, used for steel and metals-making furnaces, could drop by close to 25%, as the fuel nears its cheapest prices in 3 years. Japanese buyers are likely to settle for $160-$170 a tonne for the fourth quarter, a sharp drop from the previous quarter.
As quoted in the report:
Metallurgical coal for years was one of the commodities in tightest supply and with the strongest margins because soaring construction in China and India absorbed ever-rising quantities which could hardly be shipped quickly enough, spurring coal mining M&A and investment.
Jim Truman, metallurgical coal analyst at Wood Mackenzie, stated:
At the end of August the Q3 quarterly price of $225, which was settled in June, looked extremely strong and now even $185 is certainly looking too high.