October 21, 2020 - US coking coal prices have started showing the strain of competing with offers from Australian mining firms and suppliers, which are seeking to divert cargoes that are no longer able to access the Chinese market following a clamp down on Australian coal imports by Beijing.

The Argus daily fob Hampton Roads assessment for low-volatility coking coal dipped by a further $1/t to $111.50/t today, after falling by $3/t yesterday as similarly priced offers for Australian premium mid-volatility coal emerged in the Atlantic market this week.

The high-volatility A price fell by $1/t to $119.50/t fob Hampton Roads, supported by supply limitations that partially offset overall weakness in the market. The high-volatility B price edged down by $1/t to $103.50/t fob Hampton Roads, with tight availability also limiting the impact of an underlying weak market.

Buyers in the Atlantic basin have continued to receive aggressive offers this week for Australia cargoes previously bound for China in the fourth quarter. A northern European mill received an offer for a cargo of Lake Vermont coal loading at the end of October at $100/t fob Australia, a premium mid-volatility hard coking coal cargo for loading around the first week of November at $110/t fob Australia, and another cargo of premium mid-volatile hard coking coal for loading in the first half of December at $116/t fob Australia. But the buyer is still holding back amid market expectations for prices to fall further as China's ban on Australian coal continues.

Another European mill that secured a cargo of Peak Downs and a cargo of Peak Downs North coal last week is considering taking on more cargoes this quarter.

"There is a vessel backlog at Chinese ports that will take an estimated one to one-and-a-half months to clear at the moment... even if this is resolved between China and Australia, there will continue to be more Australian cargoes on offer in Europe for a while," one mill said.

The restrictions on Australian exports to China make Russian coal a natural replacement, a European trader said. "Russian coals have been in demand from Chinese buyers for a long time and recent developments mean that Russian coals are only going up in value," the trader said.

The Colombian mid-volatility fob price is assessed at $99.50/t today, down by $6.85/t from last week, in line with current offers for late fourth-quarter and first-quarter deliveries. Offers for Colombian low-volatility blends are around $115-125/t fob this week, while mid-volatility blends are around $20/t.

"Demand from Brazilian and Mexican mills is increasing on the back of robust order books for steel sales to Asia and the US," a Colombian trader said. But the trader is also concerned that the weakness in Australian coal will have an impact on Colombian prices.

UK-based trading company Apex Commodity is marketing mid-volatility Colombian coking coal — with 23.19pc volatile matter, 0.56pc sulphur and 9.08pc ash — sourced from the Boyoca region to be shipped from Puerto Brisa port. Apex expects to start loading monthly Panamax cargoes from late in the fourth quarter and will reference the Argus Colombian mid-volatility index.