Met Coal prices drop by half in last five months

Trent Ernst, Editor

Metallurgical coal prices spiked last year, hitting over US$300 in November. A variety of artificial factors drove price up, and miners scrambled to get as much of their coal on the market as they could before the inevitable backswing.

Since then the price has been dropping, bottoming out at nearly half that value, before stopping its slide in February, with spot prices for premium coking coal at around CAD$160.

The dramatic drop in price plays well for people who have contracts signed for the quarter at a higher value, as they are locked in at that price, which is an inversion of what happened last quarter, when spot prices were up over $100 than the companies with contracts.

Analysts are predicting the price will settle in somewhere between $140-$180 this year, which would be well up over last year’s prices. Investment bank FBR, for instance, recently predicted that Q2 contracts would be signed for US$160.

If prices remain stable at that level, it could bode well for a number of companies. While it is nowhere near it’s peak value from last year, most producers would prefer a slightly lower, but more stable long term price.

While Teck has not said what the price per tonne would need to be to re-open Quintette, they have said prices would need to settle down for closer to a year before seriously considering re-opening the mine.