By Elizabeth Low, Weng Yile, Edwin Yeo and Jeremy Lovell

March 12, 2018 - US coking coal exports could be a victim of US President Donald Trump's blanket 25% tariff on the country's steel imports, but even though the US is the second largest seaborne supplier of coking coal after Australia, the impact on the global market will be limited, market sources said.

US coking coal would logically move towards the domestic market given that US steel production would likely increase to offset the expected decline in imports, they added.

But electric arc furnaces, which use scrap rather than iron ore and coking coal, form the bulk of the country's steel output at around 70%, according to the American Iron and Steel Institute in 2017, thus limiting the likely impact on the coking coal market.

Two market sources estimated US coking coal exports to the seaborne market to fall by just 1.5 million-3 million mt. Another possibility would be the US importing more coke to supplement any likely shortage.

The US exported 49.5 million mt of coking coal in 2017, according to the National Mining Association, with exports accounting for 75% of its total coking coal production.

The seaborne coking coal market was estimated at 295 million mt in 2017, according to a Goldman Sachs report published in February.

Also, because the US is a marginal supplier of coking coal to Asia because of high freight costs, senior analyst at Wood Mackenzie Prabal Bharghava said this should mean a minimal impact to Asia.

Bharghava also expects Australia to make up for any possible shortfall from US coals.

But even if coking coal volumes are not hugely impacted by the tariffs, one market source said the uncertainty caused by the tariffs would frustrate global steelmakers' aims to reduce their dependency on Australia for coking coal.

Beyond volumes, the type of US coking coals exported could also change, as US steelmakers could shift towards procuring more high quality US coals in view of higher steel prices.

In particular, domestic consumption of US's prized mid vols and HVA coking coals could rise which would mean exports of lower quality HVB materials might also increase, a source said. 

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