Severstal Sees ‘Significant’ Drop in Coal Price in 2 Months

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  • Russian steelmaker said current coal price isn’t justified
  • Coking coal prices topped more than $200 per ton this month

Severstal PJSC, one of the biggest Russian steel producers, said coking-coal prices will "significantly" decline in the next couple of month because current levels aren’t justified.

The rally in coking coal during the third quarter was unexpected, Severstal said on Tuesday. Prices have almost tripled since the start of the year after the Chinese government imposed restrictions on working days for miners and supply was disrupted in China and Australia.

“These factors do not justify the current coking-coal price and therefore a significant decrease in prices is expected in the forthcoming one to two months,” according to a statement from the company on third-quarter results.

Spot hard coking coal rose 6.5 percent in a week to close at $246.50 a metric ton on Monday, according to data from BCS Global Markets. It’s this year’s best-performing commodity and higher prices are making it more expensive to produce steel.

Severstal, which has a blast at Vorkutaugol unit’s Severnaya coal mine, will be only 60 percent to 75 percent self-sufficient in coal next year as it seals off the troubled mine, Chief Financial Officer Alexey Kulichenko said on a conference call on Tuesday.

Severstal’s view contradicts expectations from some banks and-coal producer and second-biggest steelmaker, said last week that coal will remain above $200 a ton for the next 12 months as long as China sticks to a policy that’s curbed supply.

RBC Capital Markets last week raised price forecasts for 2017 and 2018 by more than 50 percent on a shortage that’s estimated to extend until the market balances in three years.