Coking (metallurgical) coal prices are on the rip, given further fillip by the devastating floods in eastern Australia, but what does the trend mean for investors? Most of the world’s exported coking coal is tied up in the mix of commodities produced by diversified miners.
The world’s five biggest coking coal exporters rank as BHP Billiton (No 1 by far), Teck, Xstrata, Anglo American, and Rio Tinto. Pure play, current producers of hard coking coal (the premium product) are unusual; Canada-listed Grande Cache is notable not only for that rare status, but also because its relatively high cost structure provides investors with significant leverage to rising coking coal prices.
Coking coal’s fortunes rest mainly with changes in downstream demand for steel. The specialised coal, essentially a desiccated coal with high calorific value, is used mainly in smelting iron ore in blast furnaces.