A similar difference is also observed in the global coal market at large: the average price of power-generating coal on FOB Newcastle (Australia) terms was $119 per ton, while the average price of coking coal on FOB Queensland (Australia) terms was $292 per ton. This difference is caused by the properties of raw materials for the metallurgical industry, which uses bituminous coal, a type of solid fuel, which is intermediate in carbon content between lignite and anthracite, and is also characterised by low ash and sulfur content. During steelmaking, coking coal is processed into coke and is then mixed with iron ore and limestone in a blast furnace to smelt pig iron, which gets converted into steel by adding oxygen at the final stage.
The power industry is less demanding on the quality of raw materials than the metallurgical industry. For instance, 80% of power-generating coal exported from Indonesia, the largest supplier of this type of raw material to the global market, is represented by various types of brown coal, which are characterised by high humidity and low calorific value. S&P Global Platts estimates that the energy capacity of coal shipped on FOB Kalimantan (Indonesia) terms is 3,800 kilocalories per kilogram (kcal/kg), with a moisture content of 38%, while the same indicators for coal shipments on FOB Vostochny (Russia) terms are 6,300 kcal/kg and 10%, respectively. This is why Indonesian raw materials are often traded at a discount not only to coking coal, but also to power-generating coal from other countries.
The price premium for coking coal is also linked to a more costly value chain. For instance, most of the coking coal reserves in the United States are concentrated in the Appalachian region in the east of the country, where the main mining method is underground mining, which, compared to the open pit method, requires not only more labour but also less powerful equipment. Before being exported, these raw materials are processed at processing plants to extract ash and sulfur, which leads to a decrease in product yield. However, these costs are ultimately offset by the higher costs of raw materials.
Coking coal is a growing segment of Russian coal exports. While the exports of power-generating coal from Russia dropped by 11% (21 million tons) in the period from 2021 to 2023, coking coal exports rose by 38% (8.6 million tons), according to data from the Central Dispatch Department of the Fuel and Energy Complex. The varied dynamics are linked to, among other things, the development of the Elginskoye field in Yakutia, where coking coal production increased from 5.4 million tons in 2021 to 16.5 million tons in 2022 to 18.1 million tons in 2023. The launch of the Elga-Chumikan railway line, which is slated for 2025, will make it possible to transport raw materials to the coast of the Sea of Okhotsk and bring the Elginskoye field to its design production level (50 million tons per year).
