The latest gap up for metallurgical coal came after a research report showing levels of "panic buying" not seen since 2011, when floods in key export region in Queensland sent the price soaring to $335 a tonne (albeit not for long).

The rally was triggered by Beijing’s decision to limit coal mines' operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry. Safety closures and weather related supply curbs in China and Australia only added fuel to the fire.

Australian Financial Review quotes analysts from Macquarie warning that speculation as much as fundamental factors are driving the price with a mere half-a-million tonnes (out of a seaborne trade of 200 million tonnes a year) responsible for the most recent surge:

"Transactions on the trading platform globalCOAL over the past month, which feed into spot price assessments from various index providers, have totalled just 510,000 tonnes in volume."
The bank does say "current physical market conditions are very tight and there is a sense of panic amongst buyers," which "looks like it could hold for a few more weeks," but expects prices will slide in the fourth quarter.

On top of that most producers, with the exception of BHP Billiton which set up globalCOAL a few years back, do not receive the spot price but the ruling quarterly contract price which is still in double digits.

That will change soon. In a report The Steel Index, a market information provider, notes speculation that the upcoming quarterly contract negotiations for the October – December 2016 period "may be rather combative."

According to market participants, Japanese steelmakers will undoubtedly face levels “at least above US$120/t” in the final quarter of 2016.