Coking coal's fortunes rest mainly with changes in downstream demand for steel. The specialised coal, essentially a desiccated coal with high calorific value, is used mainly in smelting iron ore in blast furnaces.

During 2010, benchmark contract coking coal prices increased from around USD 180 per tonne to recent levels around USD 250/t. While some speculators see spot coking coal prices moving up to as high as USD 500/t, a reasonable level for contact prices, all else being equal, and in the absence of extraordinary circumstances, would be around USD 220/t, according to forecasts recently published by RBC Capital Markets.

The state of Queensland, Australia, normally produces around 50% of the world's exported coking coal. It is home to the giant Central Queensland Coal Associates (CQCA) joint venture, 50:50 owned by BHP Billiton and Mitsubishi Development, also joint owners of the Gregory joint venture; BHP Mitsui Coal Pty Limited is held 80% by BHP Billiton and 20% by Mitsui & Co. BHP Billiton also owns and operates another big coking coal producer, Illawarra Coal, New South Wales.

In its financial year to 30 June 2009, BHP Billiton earned USD 4.7bn in underlying earnings (before interest, depreciation and tax) from coking coal, placing the division second on this front only to iron ore. The comparative number for the 2007-2008 financial year was USD 937m, and for 2009-2010, USD 2.1bn.

Significant new entrants to coking coal include Vale's Moatize, in Mozambique, and, not too far away in the Tete province, Australia-listed Riversdale Mining, under bid from Rio Tinto, but clearly a possible target for other potential bidders.

Eoin Treacy's view While thermal coal is traded as a future, coking coal prices are much more difficult to come by. The McCloskey/Xinhua Infolink Coking Coal Price is rarely updated while the China Coking Coal Shanghai spot price does not have very much back history. However, I believe the latter is a more representative sample of coking coal prices than the former. It broke out a two-year range this week and a sustained move back below CNY2000 would be required to question potential for some additional medium-term upside.

I reviewed a number of Australian coal companies on January 13th, including Coal & Allied, MacArthur, Gloucester Coal and Riversdale all of which are mentioned in the list provided in the above article.

I had not previously come across the Canadian listed Grande Cache. The share surmounted its 2008 peak in December and has been consolidating above C$10 since. While somewhat overextended relative to the 200-day MA, a sustained move below C$8 would be required to question medium-term upside potential.