Chinese steelmakers brace for tariffs on US coking coal

  • Market: Coking coal
  • 06/19/18

The prospect of an additional 25pc import tariff being imposed on US coal as a result of worsening trade tensions between Washington and Beijing has led Chinese steelmakers to start reassessing plans to increase purchases of US coking coal.

The reversal comes less than two weeks after China's main economic planning agency the NDRC started considering easing restrictions on US coal imports to China, including eliminating the existing 3pc import tax. US coking coal producers revived exports to China in 2017, shipping 2.8mn t, after the trade had been dormant for years, according to Chinese customs data.

China said late last week it would retaliate after the US announced plans to impose a 25pc tariff on $34bn/yr of Chinese exports starting on 6 July. A 25pc tariff on another $16bn/yr in US exports, including coking coal, would then be imposed by China if the US follows through on threatened tariffs on the same amount of trade.

"Nothing is confirmed at this point because coal has only been earmarked for the second round of tariff imposition," a US coal sales manager in China said. "But should they kick in, the final import tariff will be nearly 29pc", including the existing 3pc tariff and customs fees, she added.

And the trade spat could escalate further, after US President Donald Trump yesterday ordered his administration to identify another $200bn in Chinese imports that could be targeted with 10pc tariffs. The duties "will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced," Trump said. "If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200bn of goods. The trade relationship between the US and China must be much more equitable."

The trade tensions sent most commodity futures in China lower today. September coking coal futures closed down by 4pc, or 49.5 yuan/t, at Y1,199.5/t.

The US accounted for only 4pc of China's total 69.9mn t of coking coal imports in 2017, potentially limiting the direct impact of the tariffs. But any new taxes could reverse a shift in China's buying towards US coal and instead support imports from Australia, Canada and Russia.

Spot supply disruptions in Australia and quality issues with Russian coals led Chinese trading firms and mills to add US coking coals to their trade books and blends. US supplies work well as blending coals, and are classified as lean coal by most coke makers in China. US coals can make up 5-10pc of a blend, reducing ash levels and the required amount of premium hard coking coals, which can make up 20-30pc of the blend. The bulk of the blend is made up domestic coking coal, of which China produces roughly 600mn t/yr.

A cargo of Pinnacle hard coking coal from the US changed hands at $170/t cfr in mid-May, while a cargo of US brand Buchanan traded at $175/t cfr. Australian mid-volatile hard coking coal was selling at $180-185/t cfr at the same time.

"Some Chinese steel mills recently switched to buying Buchanan because the Russian K10 supply ran into some issues," a north China steelmaker said. "So these mills are going to face some problems finding substitutes."

Buchanan coal exported from US east coast ports has been gaining attention, as its low ash content makes it ideal to be used together with high-ash domestic coking coal. Coking coal with lower ash content is available domestically in China, but volumes are limited, the US coal sales manager said. "In the worst case scenario, mills might have to get creative and adjust their blends accordingly to accommodate the higher ash levels," she added.

The past two months saw an increasing amount of US coking coal being sold into China as consistently high Australian prices made US coal more attractive. But these cargoes, which have already been sold, will not be affected by the new tariffs as contracts would have been finalised by now.

"China's ministry of commerce is currently having discussions with major steelmakers who import more US coal, to try and find a way forward," a Zhejiang-based trader said.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
03/15/24

Lack of snow reduces Mississippi flood risk: NWS

Lack of snow reduces Mississippi flood risk: NWS

Houston, 15 March (Argus) — The Mississippi River faces below normal flood risk this spring because of historically low snowpack, meaning barges carrying fertilizer and other commodities may experience fewer delays from high water. The lack of snowpack in the Mississippi River basin resulted from persistent drought since last September and unseasonably warm temperatures across the Northern Plains, which prevented a base layer of heavy snow from forming, the National Weather Service (NWS) said in its final spring flood outlook on 14 March. Meteorologist Brennan Dettmann told Argus there is no snowpack in Minnesota, with only a light covering along the northern border, making for one of five driest years since the NWS began recording snowpack in 1872. There is no snow at the Minneapolis-St Paul International Airport this week compared to 10 inches of snow on the ground a year ago. This year, the most amount of snow on the ground at the airport was 7 inches on 14 February, according to NWS. Risk of flooding for the upper Mississippi River and tributaries will be entirely dependent on rainfall, with much of the basin already in a precipitation deficit because of the drought. Barges have been navigating through the upper Mississippi and will soon reach the Twin Cities after locks open tonight at midnight . This time last year, tows were just breaking the ice on Lake Pepin , signaling safe passage to begin through the upper Mississippi River. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

Final locks to open on upper Mississippi River


03/13/24
News
03/13/24

Final locks to open on upper Mississippi River

Houston, 13 March (Argus) — Locks 3 and 7 on the upper Mississippi River will open at midnight on 15 March after being closed for repairs, allowing access to St Paul, Minnesota, for barge carriers, according to the US Army Corps of Engineers. Barges are already heading toward the locks carrying plenty of commodities, to the northern Plains for distribution. Locks 7 and 3 are located at miles 703 and 796 of the upper Mississippi River, respectively. The Corps anticipates barges passing through the locks starting over the weekend. Navigation repairs for the locks have been finished as well, the Corps said. Maintenance for the locks determined the opening date this year, as the Lake Pepin ice measurements that typically establish the date were cancelled due to unseasonably warm weather. A barge carrier mentioned some of their barges may arrive in time to cross at midnight. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Coal output, sales rise at Indonesia’s Adaro in 2023


03/05/24
News
03/05/24

Coal output, sales rise at Indonesia’s Adaro in 2023

Manila, 5 March (Argus) — Indonesian coal producer Adaro Energy Indonesia surpassed its 2023 production and sales targets on the back of continued high domestic and international demand. Adaro produced 65.88mn t of coal in 2023, 5pc higher than 62.88mn t a year earlier. The company's main Tabalong mine saw a 1pc fall in output, which was offset by higher production from the Balangan and Mustika Indah Permai concessions. Sales rose by 7pc to 65.71mn t from the previous year's 61.34mn t, fuelled by increased sales of high-calorific value thermal coal products that rose by 26pc to 16.71mn t from 2022's 13.24mn t. Thermal coal sales reached 61.25mn t from the previous year's 58.15mn t, while metallurgical coal sales also increased to 4.46mn t from 3.2mn t. China remained the largest export market for Adaro at 21pc of total sales, followed by India at 12pc. Domestic sales remained firm, making up 25pc of the total, resulting in Adaro fulfilling its domestic market obligation quota for 2023. Revenues fell in 2023 as coal prices fell by 26pc to $96.14/t from 2022's $129.38/t. The coal cost of sales also rose by 15pc because of higher royalty rates for the Adaro Indonesia concession, a higher strip ratio and increased fuel consumption because of the higher volume moved. Adaro is targeting a modest increase in coal sales for 2024 at 65mn-67mn t, comprising 61mn-62mn t of thermal coal and 4.9mn-5.4m mn t of metallurgical coal. By Antonio delos Reyes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

South32 sells Australian Illawarra met coal operations


02/29/24
News
02/29/24

South32 sells Australian Illawarra met coal operations

Singapore, 29 February (Argus) — Australia-based diversified metals producer South32 has agreed to sell its Illawarra metallurgical coal operations in New South Wales state to an entity owned by Singapore-based Golden Energy and Resources (Gear) and Australia's M Resources for $1.65bn. The sale, announced on 29 February, includes an upfront cash consideration of $1.05bn payable at completion, a deferred cash consideration of $250mn payable in 2030 and contingent price-linked cash consideration of up to $350mn. The operations are expected to produce 5mn t of metallurgical coal in the 2023-24 fiscal year ending 30 June. Output in the six months to 31 December 2023 was 1.78mn t, down by 35pc on a year earlier. Australian coking coal exports for 2023 were 151.28mn t, which is the lowest shipped since 2012, down from 160.53mn t in 2022 and a peak of 186.83mn t in 2016, according to Australian Bureau of Statistics data supplied by GTT. The operations' unit cost was expected to be around 20pc above the guidance for 2023-24 at $140/t because of lower volumes following the longwall moves during July-December 2023. The Argus fob Australia premium hard coking coal index average is $318.34/t so far this month, down by 4pc from an average of $331.95/t for February 2023. The Illawarra operations include two underground metallurgical coal mines Appin and Dendrobium, along with the West Cliff and Dendrobium coal preparation plants. Illawarra Metallurgical Coal also manages the Port Kembla Coal Terminal on behalf of a consortium of partners. The Illawarra venture comprised 35pc of South32's group capital expenditure for 2015-16 to the first half of 2023-24. Gear M Illawarra Met Coal will acquire 100pc of Illawarra, with Gear subsidiaries holding 70pc and M Resources 30pc. Gear has a 59pc interest in Australian metallurgical coal producer Stanmore Resources, which had entered into an agreement to acquire South32's 50pc interest in the Eagle Downs metallurgical coal joint venture earlier this month. The project has been in care and maintenance since late 2015. By Deepali Sharma Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Australia's Stanmore exceeds 2023 coal output guidance


02/26/24
News
02/26/24

Australia's Stanmore exceeds 2023 coal output guidance

Shanghai, 26 February (Argus) — Australian mining firm Stanmore Coal's output of 13.2mn t in 2023 exceeded the top end of its 12.3mn-13mn t guidance, despite unfavourable weather affecting operations. Stanmore produced 13.2mn t of saleable coal on a 100pc basis in 2023, compared with 9.2mn t in 2022, a reflection of a full year of production from the former BHP Mitsui Coal (BMC) assets acquired in May 2022. Saleable production across all its operations — South Walker Creek, Poitrel and Issac Plains Complex — increased in 2023 on the year, with output at South Walker Creek hitting a record high of 6.3mn t in 2023. Mining operations recovered well after being affected by wet weather conditions, particularly in the first quarter of 2023. Logistical operations at South Walker Creek improved in the second half of the year, with support provided by a newly-contracted rail service provider. The firm had previously stated in its report for the first half of 2023 that it was working to secure increased rail capacity to alleviate ongoing logistical chain constraints in Queensland's infrastructure network. The firm expects to produce 12.8mn-13.6mn t of saleable coal in 2024, incorporating the additional volumes from its Millennium Complex. Stanmore's costs were at $86/t fob for 2023, higher by $3/t compared to 2022, owing to inflationary pressures and operational costs, the company said. The firm expects higher costs per tonne in 2024 with a guidance range of $99-104/t, in view of the relatively higher unit cost of Millennium. Argus assessed the premium hard low-volatile metallurgical coal price at $314/t fob Australia on 23 February, down from a recent high of $366.25/t on 13 October. It assessed the low-volatile PCI price at $172.20/t fob Australia, down from $222.10/t over the same period. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.