January 13, 2021 - US coking coal prices continued to edge up, with buyers increasingly conscious that ongoing supply tensions that have carried over to the high-volatile coal segment since December may not ease in the near term.

Demand from Chinese buyers remains healthy well into the second quarter, while European spot interest is expected to stay similarly strong on the back of rising steel demand and prices.

The Argus-assessed fob Hampton Roads price for low-volatile coking coal moved up by $2/t to $159/t, driven by Chinese buying and shrinking availability of non-Australia coals in the latter part of the first quarter. The high-volatile A assessment rose by $2/t to $149/t as suppliers with spot cargoes available to load from March onwards are seeking $150/t or higher. The high-volatile B price is up by $2.50/t to $127.50/t as offers creep towards $130/t in a tight market.

A cargo of US low-volatile Buchanan coal for March loading was heard offered at $198/t cfr China, while a cargo of US high-volatile coal for March loading was heard offered at $190/t cfr China. The specifications of the latter offer are understood to be similar to a high-volatile B — 35.5pc volatile matter, 7.4-7.9pc ash, 0.95-1pc sulphur and 27,000 fluidity. But the offer suggests that it may be a blend or have dilatation index nearer a high-volatile A coal, said market participants.

European demand continues to be strong this week, with mills seeking spot volumes showing a willingness to pay prices comparable with Chinese cfr levels to meet their additional requirements. A European mill is understood to have bought 10,000t of US low-volatile coal at $157/t fob Hampton Roads from a US miner, after intending to buy a larger volume. The same miner had sold a small lot of low-volatile coal just a fortnight ago at over $20/t lower, reflecting how rapidly prices have risen. "Our next availability for low-volatile coals is likely to be in April. Offers for April cargoes will certainly be higher," the miner said.

While some European buyers are still reluctant to accept the premiums that US coals are commanding over higher-quality Australian coals, the production cuts in US coal production last year has given suppliers some confidence to hold firm on offers. US mines that have survived the cuts and closures in the past year and a half may be able to increase volumes by adding more shifts, but overall coking coal production in the US is not expected to rise significantly. Even if mines have not been permanently shut, it would be a challenge for some mines to return as access to capital for coal mining has already been a struggle for a number of years, said market participants.

Offers for Australian coals to Europe and South America have slowed this week, with suppliers waiting for more clarity on market direction before offering beyond-March loadings. "Offers from Australia have died down in the last week or two," said a Brazilian mill. "I think they have availability, but they are waiting to see where the market goes before selling more."