January 17, 2021 - Growing supply tightness in the US high-volatile coal segment drove prices up today. But Chinese mills are holding back on low-volatile coal purchases in hopes that Beijing will ease restrictions on Australian imports. This has capped further gains in the the US low-volatile market at the end of this week.

The Argus-assessed fob Hampton Roads price for low-volatile coking coal was unchanged today as more Chinese buyers take a wait and see approach towards March loading cargoes, amid more market rumours that the end may be in sight for the unofficial import ban on Australian coal. But tightness in the market that was built on Chinese buying interest at the end of last year has buoyed high-volatile coal prices today. The high-volatile A assessment rose by $1.50/t to $150.50 while the the high-volatile B price increased by $2/t to $129.50/t, as suppliers hold firm on offers for any remaining first quarter volumes.

A European mill secured a 50,000t cargo of February-loading Lake Vermont yesterday at $98.50/t fob Australia, $2.50/t higher than a similar cargo traded two months ago.

A US mining firm in discussions with a term customer in Europe was seeking $130/t fob for high-volatile A to be supplied from March 2021 to March 2022. While the buyer's price expectations were significantly lower a few weeks ago, the bid/offer gap is understood to have narrowed notably as more signs of a potential supply shortage for 2021 emerge. "Customers are beginning to realise that the situation is tighter than they thought," the firm said.

Steel prices in Europe have continued to surge this week with Argus' daily northwest EU hot-rolled coil (HRC) index rising by €21.50/t to €718/t ex-works yesterday, keeping coking coal demand from European mills firm for the rest of this quarter and the next. A European mill is heard to still have a requirement for semi-soft high-volatile coal and PCI. But spot supply availability has become increasingly limited, with key US mining firms sold out until the second or third quarter, depending on coal grades.

A Brazilian mill extended its tender for 100,000t each of high-volatile A and high-volatile B for 2021-22 delivery, but expects to close the tender next week. The lowest fixed price offers were around $150/t fob Hampton Roads for high-volatile A coal. Brazilian mills are expected to favour the use of high-volatile B over high-volatile A coal where possible because of the wider spread than usual between the two, caused by Chinese demand for some high-volatile A coals.

"We are looking for purchasing opportunities at the moment, but from May I expect we will have to be more cautious," a Brazilian mill said. "Volatility in the market has prompted us to look for greater procurement flexibility this year, and we may seek to use more high-sulphur high-volatile material to lower costs," the mill said.

Domestic steel demand and record highs in global steel prices continue to support steel sales and prices in Brazil, and mills are receiving additional enquiries for exports.