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Metallurgical coal prices are experiencing a significant surge driven by tight supply and increased demand from India, which, however, poses a challenge to the transition towards green steel technologies.
While steel producers in the western countries are making efforts to shift to low-carbon technologies, the growth of new coal-based steel mills could outweighs the development of green steel technologies 2.5 times over, researchers said.
A recent report from the Global Energy Monitor (GEM) reveals that around 80% of the steelmaking capacity of the top 50 steel producers in the world relies on carbon-intensive blast furnace-basic oxygen furnace (BF-BOF) technology. Only several of these producers have set carbon neutrality targets or committed to net-zero emissions by 2050.
The report also highlights that the imbalance between the construction of new blast furnace capacity and the development of low-emission steel technologies. The newly announced blast furnace capacity amounts to 208.2 million tonnes per annum (Mtpa), while low-emission steel capacity stands at just 83.6 Mtpa.
The longevity of blast furnaces, which can operate for up to 40 years, raises concerns about decarbonizing ability of the steel sector since options for reducing emissions from blast furnaces are limited.
While climate reporting agencies express concerns about the slow progress of green steel technologies, producers of metallurgical coal see an opportunity in the increased demand from India's expanding steel market. India's met coal demand is forecast to increase by 281% by 2050, the majority of which will need to be filled by supply growth out of Australia.
The surge in met coal prices has been witnessed globally, with Australian met coal prices reaching $342/t, US prices up to $260/t.
Whitehaven Coal has decided to pay up to $6.4 billion of two BHP and Mitsubishi's coking coal mines and to take its met coal revenue share to 70% of earnings. This reflects that while thermal coal may face challenges from renewable energy sources like solar, wind, and nuclear power, the demand for steelmaking material will persist for several decades.
Restocking by steelmakers, port constraints, and maintenance disruptions in Queensland have contributed to the push up prices, said Gerhard Ziems, CFO of Coronado Global Resources, an leading met coal supplier in Australia. The company expected improved realizations in the coming months as buyers seek to acquire tightly supplied material.
(Writing by Riley Liang Editing by Harry Huo)
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