Tropical Cyclone puts Asian steelmakers on alert

A category one cyclone is nearing the coast of Australia's Queensland state, raising concerns among Asia-Pacific steelmakers that strong winds and heavy rains could disrupt coal exports from the region.

Steelmakers and traders are mostly cautious but not yet particularly worried. "We had a vessel that was set to sail this week, but it was not let into the port and could be delayed until Wednesday or Thursday," an international trader said. "It is nothing major but the port queues can build up very quickly, and that could be enough to keep BHP from selling a spot cargo or two. The market would be more supported if things were slowed down from last week."

The storm, Cyclone Iris, is expected to remain offshore tracking southeast away from the Queensland coast from tomorrow before intensifying further, the Australian Bureau of Meteorology said.

"A lot of the market is closely monitoring Iris since it regained its category 1 status and looks to bring 400mm of heavy rain," a Singapore-based trader said. "The mines are probably too far from the coast to be affected, but it could still cause some disruption to ports and railways even if it remains offshore."

The new storm comes immediately after Cyclone Nora moved through northern Queensland last weekend, causing flash flooding in Cairns and Port Douglas.

Cyclone Debbie at this time last year sent premium hard low-volatile coking coal prices surging to $304.25/t fob Australia, as widespread flooding of the Queensland railway network forced suppliers to halt deliveries even as production at the mines remained largely unaffected.

Northeast Asian steelmakers were forced to buy domestically-produced coking coal cargoes from China as replacements for Australian coal as a result, as Chinese producers sought to cash in on the price spike brought about by the sudden shortage.

But seaborne coking coal prices have been under pressure lately as rising spot supply has forced sellers to offload cargoes at progressively lower prices.

"Only something like a weather disruption can stop the slide in coking coal prices at this point," an Indian steelmaker said.

The Argus assessment for premium hard low-volatile coking coal delivered to north China ports has fallen by 15.7pc since the start of March to $200.15/t cfr China today.