Atlantic Coking Coal: Heavy Supply Drives Down Prices
May 2, 2020 - US coking coal prices have taken another tumble this week, on lower Asia-Pacific transaction levels and weak buying interest outside of China.
The Argus fob Hampton Roads assessments for low-volatile and high-volatile A coking coal fell today by $1.50/t to $107.50/t and $106.50/t, respectively, after shedding $10/t earlier in the week. The high-volatile B assessment is unchanged at $99/t fob Hampton Roads today but lost $11/t over the week, driven down by aggressive offers on the market.
The sharp shift downwards of the HVB price was driven by high inventories at certain US mines and a willingness by these suppliers to cut prices to secure trades in Europe. A June delivery for an HVB cargo to Italy for a European mill was concluded at firmly below $100/t fob Hampton Roads, setting the precedence for other similarly competitive offers.
Suppliers with LV and HVA cargoes available have also been pushed to offer discounts on index-level prices. "I would say anyone buying would be looking for a discount to index prices, except for maybe high-vol B coals," one mining company said.
A sale this week by an Indian mill for a cargo of Peak Downs North at $99/t fob to a Chinese trading company also points to the continued absence of demand in southern Asia. Market participants are expecting to see more of such diversions by Indian mills until their steel production capacity returns to normal. This further adds to the downward pressure on US coals, with demand largely narrowed down to China. The start of the Labour Day holiday in China today also meant that bids from Chinese buyers declined progressively over this week.
There were more spot opportunities for high-vol B than for higher grades in recent weeks, with mills trying to slow coke production. But a northwestern European mill also said it would not be requiring any high-vol B coal until July, while a US high-vol B producer said it would not be offering any until July.
Most European steel mills are making efforts to delay cargoes rather than buy them. "People are trying to survive by not buying too much," one mill said. While mills face rising coke inventories as they keep their coke ovens running, another mill said steel producers are still trying to minimise the use of coke in production and maximise the use of PCI, which is cheaper and more difficult to store.
US mining companies are hopeful that production cuts in Australia will offer support to prices. "That would go a long way towards establishing a floor and providing support," one US mining firm said.
US mining firm Blackhawk restarted operations last month after a temporary halt on 23 March aimed at containing the spread of Covid-19.