Atlantic coking coal: China keeps driving US prices

US coking coal prices strengthened further early this week, buoyed by supply tightness across segments and strong demand from Chinese mills for low-volatile coals stretching into March next year.

The Argus fob daily assessment for low-volatile coking coal rose by $5/t to $125/t fob Hampton Roads as robust demand from Chinese mills drove up delivered prices to $170-175/t cfr China while Australian coals continue to be offered much lower into other regions. The high-volatile A assessment moved up $1/t to $120/t on continued tightness of supply and offers for the second quarter tracking upwards. The high-volatile B assessment rose by $1.50/t to $106.50/t fob Hampton Roads with very little spot availability on offer.

A cargo of Blue Creek 7# was heard to have been secured by a Chinese trader at $170-175/t cfr today but the details could not be confirmed. A US trader was heard to be offering a similar cargo as high as $180/t cfr China yesterday.

Chinese appetite for US coals has remained strong, with recent deals surpassing market expectations. Just last week, there were expectations among Chinese market participants that the rapid price hikes would push Chinese mills towards domestic coals instead. "I think $180/t cfr still seems a bit high, but it depends on the quality and how desperate the mill is," said one Europe-based trader.

As political tensions between China and Australia worsen this week, Chinese mills remain in the market for US low-volatile cargoes beyond the Lunar New Year holiday in February. "The Chinese buyers are looking for February and March laycans and they have bought up all the available met coke in the market," said one trader. "They are certainly in the market for the longer haul."

The supply tightness in the high-volatile segment is growing, with European mills entering the market for spot cargoes in the first quarter but many not finding much availability until the second quarter at least. Traders have indicated little to no availability for high-volatile B coals in January, and buyers are likely to have to turn to high-volatile A coals to meet their needs. The major suppliers are mostly committed to term supplies, while marginal producers that typically offer in the spot market have turned to domestic outlets instead of waiting for European demand to return, said a European trader.

But European mills are still making the most of the low Australian prices, with one mill securing a January-loading Panamax cargo of Peak Downs mixed with Riverside or Peak Downs North coal at $100.50/t fob Australia late last week.

The Colombian mid-volatile price is assessed unchanged at $110/t fob Colombia as limited availability has capped trade with Chinese buyers despite the interest. One trader is heard to be offering Colombian mid-volatile coal for March loading at $110/t fob. A European trading company sold an 8,000t cargo of Colombian high-volatile coking coal with 67 CSR and 8-9pc ash to a Brazilian steel mill in the last few days at an index-linked price or the equivalent of $95-100/t fob Colombia. Larger cargoes have been difficult to put together because of the high demand for Colombian coal to feed the coke plants.

Strong buying from China and Brazil has kept metallurgical coke in short supply, despite the fact that most European mills are not active in the market. "At the moment there isn't a great deal of choice regarding quality," said a buyer. "Colombia is selling to Brazil at high prices and Russian suppliers are sold out. We're now focussing on Poland and the Czech Republic." Sales of Polish metallurgical coke are being discussed around €230-240/t for material with 60 CSR and 11pc ash, said a trader.