JFE Steel Corp, Japan's second-largest steel producer, plans to increase its purchases of coking coal from the spot market in a bid to stabilize volatile prices of the key steelmaking ingredient, a senior company executive said.

Hiroshi Daimon, senior vice president at JFE Steel, said the lack of liquidity in the spot market has contributed to prices diverging from iron ore costs and allowed possible manipulation of industry price benchmarks.

Currently, monthly spot trades for Australian hard coking coal at fixed prices have plunged to 400,000 tonnes compared with around 2 million tonnes in early 2020, JFE noted.

Spot transaction volumes at fixed prices only account for less than 5% of total seaborne coking coal traded globally, the company said, far below 30% for spot thermal coal and 15% for iron ore.

"We want to increase our spot trading as much as possible to increase the liquidity of the market and to reflect true demand and supply, though it’s still like a drop in the desert," Daimon said, without giving a specific volume figure.

JFE began spot purchases at fixed prices in 2022, with a target of around 500,000 tonnes annually. However, this is a small fraction of JFE's total 17 million-tonne annual procurement.

Even with some increased spot buying by Indian steelmakers, Nippon Steel, Japan's largest producer, said the market faces low transparency issues.

(Writing by Alex Guo  Editing by Emma Yang)
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