October 23, 2020 - US coking coal prices have continued to face downward pressure at the end of the week as Australian offers no longer exportable to China continued to make their way to buyers in the Atlantic, amid a steep decline in prices.

But there continues to be demand from Chinese buyers for US and Russian coals, with discussions continuing for cargoes available to load in the coming weeks.

The Argus daily fob Hampton Roads assessment for low-volatility coking coal was unchanged today at $109/t but down by $6.50/t from a week ago, reaching parity with the Australian premium low-vol price. The presence of competing Australian cargoes in the Atlantic will no doubt continue to weigh on the US low-volatility coal price for the rest of this quarter.

The high-volatility A price fell by $1.50/t to $117.50/t fob Hampton Roads, but supply tightness has helped to somewhat stem the weakness spilling over from the low-vol segment. The high-volatility B price was unchanged at $103/t fob Hampton Roads, as availability even going into the first quarter remains limited.

"We have a busy first quarter already in the books and on the high-vol front we are comfortable for the next couple of quarters," one US mining firm said. "But things are bearish in the low-vol segment as we expect prices to come down with competition from Australian miners." The US east coast low-vol offerings would struggle to compete in terms of quality, for example with CSR in the 60s compared with 72 for Peak Downs.

Discussions are continuing between Chinese mills and suppliers of US and Russian coals, market participants said. "It seems there is some swap interest for US coal going east and Australian coals coming this way," a Europe-based trader said. Russian suppliers have been receiving a steady stream of enquiries, but some have little availability to offer for the rest of this year.

The mood among European mills is increasingly positive going into next year despite concerns about a second Covid-19 lockdown or tighter restrictions in some European countries as infection rates have risen again. Pointing to that confidence,ArcelorMittal is targeting €550/t for quarterly, half-year and yearly hot-rolled coil (HRC) contracts with northwest European service centres next year. This is an increase of more than €100/t compared with 2020 contracts. Interest in Australian offers from European mills has been healthy, but mills are anticipating that prices will soften further and are taking their time with purchases. "We are expecting the Australian low-vol prices to hit the double digits so we are still in no rush to buy cargoes. We are expecting this to last at least until the end of the year," one northern European mill said. While overall spot demand has improved, it will still not be strong enough to make up for all these diversions, the mill added.

Strong demand for Colombian metallurgical coke, driven by China earlier in the year and now by the return of Latin American buyers, has supported prices around the level of $250/t fob Colombia. "Colombian coal suppliers get a better price from coke producers than from exports at the moment," a trader said.