Atlantic coking coal: Market awaits Brazil indications

US coking coal prices held mostly steady at the end of this week, with European demand muted for the third quarter but confidence among US mining firms is holding up despite weakness in Asia.

The Argus daily low-volatile price edged down by 50¢/t to $104/t fob Hampton Roads, while the high-volatile A and high-volatile B prices remained unchanged at $110.50/t fob Hampton Roads and $104.50/t fob Hampton Roads, respectively.

European demand is not expected to show significant recovery until well into the fourth quarter, but a string of Brazilian tenders for second-half shipments awaiting results have supported sentiment in the Atlantic. The effect of supply disruptions in the US in the second quarter and some mines still waiting to fully resume operations mean US firms are in a comfortable position, market participants said. A Brazilian steel mill has issued a 10,000t tender seeking a trial cargo of low or mid-volatile coals. But the small volume points to the likelihood this is aimed at existing US and Australian suppliers with spare capacity on an existing shipment to Brazil.

Raw steel production in Latin America rose by 8pc in May compared with April, mostly driven by Brazil, where production and consumption grew from a low base in April. This is down by 22.6pc on the year with capacity utilisation at just 51pc, the Brazilian Steel Association said.

Spot demand in the Atlantic is largely restricted to Brazilian and Turkish mills for the third quarter, and despite healthier inventories at mines, some suppliers may still be open to discounts, some traders said. "I know for a fact that Brazilians buy at a discount to the high-volatile B index," one US trader said. But he added that his clients are not in the market.

Chinese import restrictions on Australian shipments have made a significant dent on prices with the Argus assessed Australian premium low-volatile price falling by $3.95/t over the week to finish at $109.95/t fob Australia today. But with these restrictions still not appearing to apply to Russian and US shipments, the impact of the softening on Atlantic prices has been limited.

Indian buyers are still largely holding off on spot buying until after the monsoon season in September, but mills are keeping an eye on falling coking coal prices, traders said. "India is a mixed bag — while the monsoon is on, it needs the steel export market to stay strong," one miner said. Strained political relations with China have thrown some doubt on the near term viability of Indian steel exports but there is optimism that Indian mills will need to return for restocking. "There will be Indian demand in the fourth quarter, they don't have high-quality reserves so there should be some re-stocking," one trader said.