World Price of Coking Coal

From 2003 to 2008, the price of coking coal tripled, mainly due to demand growth from China, and to a lesser extent India, Brazil and Russia (BRIC). Coking coal is used to make steel, a product demanded heavily to support the BRIC countries' rapid industrialization. The price growth was exacerbated in 2008 when flooding in Queensland, Australia (one of the world centers of coal mining) closed coal mines for months, strongly restricting the world's coal supply. Lost production could not be compensated for later in the year due to export limitations on Australia's ports. As a result of the supply shock, coking coal prices rose from 50.0% over the year to an average of $133.69 per short ton. The global financial crisis unfolded in the second half of 2008, and world trade plummeted heading into 2009. As businesses around the world struggled with debt issues and reduced revenues, they scaled back on investment in large-scale infrastructure projects that require vast quantities of steel. The reduced demand for steel reverberated through the supply chain, dropping demand for coking coal. Low demand dropped the price of coking coal by 11.4% in 2009.

The world economy returned to growth in 2010, and the demand for steel returned. The increased demand drove the price of coking coal up 23.4% over the year to $146.07 per metric ton. Queensland, Australia experienced significant flooding again in early 2011, causing another supply shock. As a result, the price of coking coal spiked 27.4% in 2011. In 2012 and 2013, no such supply shock occurred, causing the price of coking coal to fall 18.7% in 2012 and 23.8% in 2013.