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Atlantic Coking Coal: Chinese Interest Steadies Price



October 17, 2020 - US coking coal prices were flat today, propped up by limited supply availability and growing spot interest from Chinese mills. But confirmation of deals for US coals to Chinese buyers has yet to emerge.

The Argus daily fob Hampton Roads assessment for low-volatility coking coal was unchanged at $115.50/t, supported by US miners receiving more enquiries from Chinese buyers this week despite weakness in the Australian premium low-volatility price. The high-volatility A price was similarly flat at $123/t fob Hampton Roads, but edged down by $1/t as concerns over diversions from Australian mines weigh on sentiment. The high-volatility B assessment was also stable at $107/t fob Hampton Roads.

US miners have not been alone in receiving more spot enquiries from Chinese mills seeking alternatives to Australian imports following further import restrictions being introduced. Russian suppliers in the past week have also started fielding more enquiries from Chinese mills for PCI and semi-soft grades, said traders. A Chinese mill was heard to have secured a cargo of low-volatility Russian PCI to be shipped from a far Eastern port at around $80/t fob. "The cargo was sold without much debate over prices, indicating how strong demand is," said the supplier.

Demand for Russian semi-soft coals has also been rising as supply availability among Chinese domestic mines is possibly low amid the restrictions on Australian shipments. With much of fourth-quarter volumes tied up, Russian exporters and miners with supply are no doubt taking the opportunity to push up prices while demand is picking up, market participants said.

There continues to be concern that Australian coals might move in to secure sales with ex-China buyers that have been holding back on purchases as the market softens. A European mill is due to receive a Capesize delivery combining two Panamax shipments of Peak Downs and Peak Downs North coals, for delivery late October to November. The cargoes were sold via a trader at $125/t fob Australia for the Peak Downs and at $120/t fob for the Peak Downs North, about $6/t lower than a similar cargo sold last week.

The weakness in Asia-Pacific prices has also meant that some buyers are taking their time to assess the market. Indian buyers previously in discussions for US coal purchases in the fourth quarter have gone quiet, said a number of traders who had been negotiating sales.

"I think that this is actually bad for US miners, Australian coal will now be pushed into all other markets, Aussie miners are far more competitive from a production price point of view," said one trader. While there may be some opportunity for US coal into China, many US mines would have issues meeting the Chinese trace element standards, the trader said.

The differential between Australian premium low-volatility and US low-volatility coals has narrowed rapidly from $22/t at the start of October to $6.20/t today, further reducing the competitiveness that US coals had against Australian coals. But there remains a healthy level of interest in US low-volatility from Chinese mills, US miners said.