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Atlantic Coking Coal: Spot Shortage Emerges



January 8, 2021 - US coking coal prices surged higher today as a growing shortfall across the low volatile and high volatile segments emerges amid robust US domestic demand and continued strength in Chinese buying interest.

The Argus assessed fob Hampton Roads price for low-volatile coking coal increased by $6/t to $157/t today, as domestic supply tightness and the ongoing restrictions on Australian coals drive up Chinese bids for US coals. The high-volatile A assessment moved up in line by $6/t to $147/t, buoyed by low availability and still unmet spot requirements from European and US mills. The high-volatile B price increased by $2/t to $125/t, similarly driven by limited spot availability.

Chinese appetite for US and Canadian low volatile coals has continued to build on fourth-quarter strength and few US mining firms are heard to have any spot availability until the second half of February or the second quarter. But traders holding on to cargoes are expected to offer at levels equivalent to Chinese domestic prices, particularly for established brands. A cargo of low-volatile coking coal was sold to a Chinese buyer yesterday for February loading. Further details could not be confirmed. Availability among US mining firms is dwindling for the first quarter, market participants said. A US mining firm that had sold a small low volatile cargo in the mid-$130s just before the Christmas holiday had been approached for two prompt low volatile cargoes in the new year but had no volumes to offer.

US domestic coking coal demand has started the year on a strong footing, supported by high hot-rolled coil (HRC) prices and reduced coal production capacity among mining firms. The Argus weekly domestic US HRC index rose by $20/short ton (st) to $1,020/st ex-works Midwest this week. "We have had requests from domestic customers seeking to bring forward term contracted cargoes, but we have no further volumes for the first quarter," one US mining firm said. New settlements in the US domestic market are being negotiated in terms of seaborne index levels. "The US domestic buyers looking to add tonnes are competing with the international market," the mining firm said.

Higher steel demand in Europe has also driven up demand among European mills for high volatile coals with mills still holding ongoing enquiries from before the holiday period.

Overall demand is looking to outweigh available US supply if Chinese mills continue to seek out US coals this year, market participants said. "Somebody is not going to get the coal they think they are going to get this year," one supplier said.

The coke market continues to tighten, and Colombian suppliers expect levels of around $370/t fob Colombia for cargoes loading in February or March while offers for 65 CSR Australian coke are heard to be around $400/t fob. "Demand from Brazil is very strong, and we are sold out until June," a supplier said. Colombian coke producers are receiving enquiries from US and Canadian steel mills. "Our last shipment to Canada was in 2014, and we have not sold to the US since before the 2008 financial crash," a Colombian producer said.