Exports to China of Australian coal used in steelmaking are set to rise sharply, replacing Mongolia as its top supplier, brokerage Goldman Sachs JB Were said in a report on Wednesday.
It said that after averaging just over 6 million tonnes a year for the past five years, China's imports of coking coal are expected to exceed 13 million tonnes in 2009.
"Australia should be the main beneficiary of this growth, accounting for almost 6 million tonnes of the additional 6.5 million tonnes of foreign coal that we expect to flow into China this year," Goldman said in the report.
Canada and Mongolia are also likely to ship more coking coal to China this year, but their share of the Chinese import market looks set to fall as Australia becomes China's leading foreign coal supplier. Mongolia has been China's largest foreign supplier for the past three years, according to the report.
China's small coking coal mines are struggling to comply with increasingly stringent safety standards and challenging geological conditions, meaning domestic suppliers were unable to match projected demand growth from Chinese coke makers, it said.
Total shipments of hard coking coal from Australia to China are forecast to climb to a record 7.3 million tonnes this year, meaning China could account for almost 10 per cent of all Australian exports, up from one per cent last year and a previous high of five per cent in 2004, the report said.
China has been buying Australian coking coal at $US105-$US115 per tonne, cost, insurance and freight, which translates into $US97-$US107 per tonnes free on board, the brokerage said, citing sector research group McCloskey Coal.
At that price, a solid floor existed for spot hard coking coal prices of around $US100 per tonne FOB Queensland, it said.
Goldman also forecast a 2010/11 contract price of $US120 per tonne for Australian hard coking coal.
Source: Business Spectator
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