Atlantic coking coal: US prices up, demand brisk

US coking coal export prices ticked higher in the past week, supported by gains in the Asia-Pacific market and a brisk pace of enquiries from buyers globally.

The Argus weekly fob Hampton Roads assessment for low-volatile coking coal is at $187/t today, up by $2/t from a week ago. The weekly fob Hampton Roads assessment for high-volatile type A (HVA) coking coal is up by $1.50/t at $199.50/t, while the high-volatile type B (HVB) index is up by $1/t at $165.50/t.

Spot enquiries have risen steadily since the beginning of February, with more coming in now than have been seen yet this year, US market participants said. One producer attributed the uptick in activity to a combination of Australian cargo delays and widespread expectations of prices rising further now that Chinese buyers have returned – spurring other mills to lock in their additional spot requirements now.

A trader noted that it might not be accurate to describe all the latest enquiries in the market as true spot business, adding that in some cases it is a matter of laycans for pre-booked contract tonnes being adjusted or mills looking to add additional tonnes to existing term contracts. One such mill was recently noted looking to add extra HVA to an existing supply contracting after encountering blending difficulties with trials of a different origin.

Talks are now largely focused on the second quarter or further ahead, with most US suppliers understood to be sold out for the first quarter. One producer said its negotiations on high-volatile grades are currently all being done on an index-linked basis, at slight discounts or premiums depending on the exact grade and customer but without significant deviation from those market reference points.

Capesize freight rates from Queensland to Rotterdam edged down a further 15¢/t in the past week to $9.50/t amid sluggish activity, taking indicative cif Rotterdam prices for Australian premium hard low-volatile coking coal to $217.90/t – up from $210.65/t a week ago.

Panamax rates from the US east coast to Rotterdam are pegged at around $8.50/t, leading to a cif Rotterdam price for US low-vols of around $198/t.

Panamax rates from the US east coast to India have slumped lately, last assessed by Argus at $21.25/t – down from $27.50/t at the start of 2019 – in part owing to a drop in thermal coal exports. The drop is also underpinned by seasonal factors as the dry bulk market waits for South American grain shipments to start in March/April, helping to alleviate the oversupply of available ships.

Russia

A European mill is in negotiations to book an undisclosed volume of semi-hard high-volatile Russian coking coal – a particular brand previously only used in Russia's domestic market or exported to the Far East, according to a market participant close to the talks. The mill's interest in starting to use this product in its blends aligns with Europe's longer-term strategy to reduce reliance on Australian premium grades, although Russian coking coal is often met with mixed reactions in Europe depending on the specifications.

"The big question is not whether the Europeans can use this type of coal - they can, albeit at a lower percentage than Asian mills. But whether it's competitive compared to high-vol blends from the US – that remains to be seen," the same market participant said, noting that Russian port capacity constraints may also render these Russian grades less desirable than US equivalents.

Colombia

Domestic coking coal prices have come under further pressure amid the latest wave of restocking, as local coke plants push for discounts. A Colombian market participant said domestic coking coal prices have come down by around 15pc in recent weeks, to around $96.05/t from $113/t ex-mine, albeit some price variation is assumed depending on exact grade and region.

By contrast, export prices are supported by firm seaborne fundamentals and tentative gains in the tier two Asia-Pacific market as Australian rail capacity cuts and recent heavy rainfall keeps supply tight. The Argus weekly fob Colombia assessment for mid-volatile coking coal is at $167.50/t today, up by 50¢/t from a week ago.