NAE Chart, page-475

I just like contrarian views, particularly when people are saying "you might be kicking yourself for not buying at these levels and trying to get it 1pip cheaper."

I'm still with you all, again, I hold But balance, right?

http://www.hellenicshippingnews.com/coking-coal-looks-to-beijing/

Chinese government policy may continue to drive the coking market in 2017, after Beijing helped spark an unexpected price rally this year.

Coking coal prices outperformed those of any other major commodity in 2016, to the surprise of most market participants. But the price gains were driven largely by Beijing’s intervention in the market to restrict Chinese coal supplies, rather than any sustained surge in demand from steelmakers. And this leaves the market facing a high level of uncertainty going into 2017, as prices fall back from a sustained five-month rally that delivered unexpected profits to mining firms and deep financial problems for all but the most flexible steelmakers.

Premium hard coking coal prices more than tripled from $76.67/t fob Australia on 1 January to $247.15/t as of 23 December. The peak of $314.25/t hit on 17 November was just short of the all-time high of $336.25/t reached during the Queensland floods of January 2011.
The rally began in earnest in early August, as prices rose above the $100/t fob Australia level. But the seeds of the price gains were sown in February, when the Chinese government decided to limit operations at Chinese coal mines to 276 d/yr, from 330 d/yr previously, primarily in an attempt to reduce overcapacity in the thermal coal sector.

The government actions had an unintended — although predictable — impact on the market. Higher-cost producers shut down, gradually tightening domestic supply and forcing Chinese steelmakers to increase their reliance on imports from Australia and elsewhere.
Prices broke through the $200/t level in mid-September, helped by force majeure declarations at two major Australian coking coal mines: Australia-listed South32’s Illawarra mine in New South Wales, and UK-South African producer Anglo American’s German Creek mine in Queensland.

The disruptions, both triggered by roof instability at underground mining operations, sent buyers into the spot market to seek out replacement cargoes. The rush to buy caused prices to spike by $23.75/t in a single day in early November, and sent market values above $300/t for the first time in over five years. This prompted increased interest from suppliers, with owners of idled mines in Australia, the US and Canada watching closely to gauge whether the rally was sustainable enough to restart production.

The Chinese government was also faced with a dilemma. The limitations on coal mine output had perhaps worked too well, raising the prospect of a shortage of thermal coal for heating ahead of what was expected to be a cold winter. Top economic planning agency the NDRC decided in November to loosen the rules, allowing all mines with the proper safety certifications — including coking coal mines — to return to the previous 330 d/yr limit.
China’s domestic coking coal mine production could increase by 10mn-20mn t by the end of March 2017 as a result of the policy change, analysts have estimated, although output data are not yet available. But the policy change had an immediate impact on the market, with spot prices falling back below the $300/t fob Australia level earlier this month and dropping below $250/t just before the Christmas holiday. The resolution of the production problems at Anglo’s German Creek mine quickened this decline, while supply could increase further with South32’s Illawarra mine expected to resume normal output by the end of the year.
The market trajectory now looks to have clearly reversed after the earlier strong gains, but several factors could still upset expectations for 2017. North American producers have started marketing and sales from restarted mines as they look to win market share in Japan and Europe at the expense of higher-priced Australian producers, but it is still unclear how much extra supply they will be able to add to the seaborne market.

Weather conditions are perhaps the most unpredictable factor. Any repeat of the heavy 2011 floods in Queensland will almost certainly send coking coal prices to a new record. And despite rising supply in China, mills in coastal areas may need to return to seaborne markets if domestic rail transportation is disrupted by harsh winter weather.

But the biggest uncertainty stems from Beijing. The Chinese winter heating season typically ends in mid-March, after which policymakers could decide to renew their clampdown on production and send prices higher again. Government decisions are tough to predict, but both producers and buyers will be watching Beijing as closely as market fundamentals in the coming months.