Coking coal market is destined for year-end fireworks with emergence of demand from the pale shadow of poor steel demand. Indications of uptick in steel production and demand and China and India have instilled confidence in the raw material segment.

Good news about improved PMI in China and India poured last week giving traction to the coal price. In China the official PMI index rose to 50.2 from 49.8 in September indicating of graduation from contraction to expansion.

Even though HSBC PMI data remained in contraction zone climb to 49.5 in October from 47.9 in September was enthusing.

HSBC manufacturing PMI, which gauges the business activity of India's factories but not its utilities, nudged up to 52.9 in October from 52.8 in September exemplified demand related production growth.

In the backdrop of optimism steel mills will be yearning to capitalize with enhanced production. China has already taken the lead with 8% increase in steel production to 1.99 million tonne per day 2nd 10 days of October (10-20th October) from end September. Improvement in steel price by 10% since after the National Holidays is another encouragement.

Pragmatic steps like abandoning of expansionary plans (production cut of 25 million tonne in Q3) and shedding of manpower was notable in production rationalization by the miners. Hike in cost by increasing royalty in Australia with wage revision after the labor unrest have set higher floor for miners.

Freight market has shown uncanny resilience driven by increase import of iron ore in China .Capesize market has experienced increase with average earnings for a 172000 dwt vessel, as measured by the Baltic Exchange, of USD16,934/day up by al¬most USD 2,500/day on 7 days ago.

Re-emergence of labor unrest in BMA and terminal of Port Kembla in NSW is facing industrial action from marine pilots. Restricted logistics from Eastern USA ports after “Hurricane Sandy” will constrict supply.

Above factors have given strength quality miners from Australia withdraw from the spot market leveraging Q4 price negotiations likely to settle at least USD 15-20 per tonne more in prime quality .

However the flurry is expected to be short lived peaking after stock replenishment unless steel market continues to ride the crest on improved economic indicators in China and USA. Clarity is expected to dawn after the US Presidential election and handling of economic cliff which will have cascading impact on global sentiments. Moreover with change of guard in China on 8th November traders and stockiest are expected to unleash withheld demand giving fillip to sentiments in the twilight of 2012.