Atlantic coking coal: Outlook firms for high vol

US coking coal prices have been flat to slightly stronger early this week ahead of current third-quarter spot requirements in Europe closing. But confidence is growing among US high-volatility coal suppliers as some are seeing more buying interest than expected in the third quarter, particulary from Europe.

The daily Argus-assessed low-volatility coal price is unchanged today at $107.50/t fob Hampton Roads, while the high-volatility A price is up by 50¢/t to $113.50/t fob Hampton Roads and the high volatility B price is up by 50¢/t as well to $107.50/t.

"While we're still working on third-quarter deals, momentum is clearly on the upside," said one US miner, citing improved interests from Europe, India and Brazil. Prices may not be going up quickly but they are supported, said the miner.

Slowly recovering steel prices have also supported the mood in Europe, where there are expectations among suppliers for a high-volatility A spot requirement to emerge this quarter.

Expectations of Brazilian demand continue to improve following the restart of CPS and Gerdau Acominas' blast furnaces, with another steelmaker expected to restart blast furnaces that were idled in April amid the coronavirus outbreak in Brazil.

There is likely to be a high-volatility B requirement emerging for September delivery and possibly further demand in the fourth quarter, said market participants. But this increase in spot demand does not necessarily point to a growth in overall demand, but rather a shift towards more frequent or quarterly procurements by Brazilian mills. Still Brazilian demand is coming in above expectations for some suppliers. "We have seen some laycans adjusted to bring forward deliveries to Brazil," said one miner.

There has been reduced demand for Colombian coking coal and met coke, but one trader indicated that Colombian producers have been able to sell cargoes to China recently as long as they have stayed at around $210-215/t. "That is a viable price for Colombian suppliers," said the trader. "I think Chinese met coke prices have been a bit overhyped." Last week, Chinese domestic spot deals were concluding at around Yn2,020/t for 62 CSR and Yn2,120/t for 65 CSR at north China ports, equivalent to around $293/t and $308/t on a fob basis, respectively, for export. Coke plants in China are operating with gross margins of around Yn500/t.

While the restrictions on China's imports of Australian coking coal have continued to weigh on prices, particularly in Asia-Pacific, the restrictions do not appear to apply to US miners, traders said. Large Chinese mills and those with remaining import quota allocations have still be able to maintain their imports.

But the appeal of US coals among Chinese mills is limited to select miners. While few US miners have managed to transact with Chinese buyers recently, suppliers of Russian coal have made several shipments to China, but with a degree of uncertainty attached. "They are booking cargoes but it's not relaxed — you might have to take it through a different port for example," said one trader. "The freight routes only take three to four days, which is an advantage over other coals, and there might be a political factor as well."

New Covid-19 infection cases have been on the rise in the US, but US miners that are still slowly restarting operations since their Covid-19 linked stoppages earlier this year have yet to indicate any change in their plans. "We are not running at 100pc at the moment and the period after 4 July is typically a holiday period for miners anyway, so there are no plans to cut back. But we are not going to push up production either to produce coal to keep it in our inventory," said a miner.