Atlantic coking coal: Prices weak despite supply doubts

US coking coal prices continued to lose ground this week as concerns over supplies amid a string of mine closures have been diminished by cuts to steel output, transportation disruptions and high existing inventories at the mines.

The Argus daily fob Hampton Roads assessment for low-volatility coking coal was stable today at $131.50/t, having fallen by $3.50/t since Monday. The high-vol A and high-vol B assessments were also stable at $129.50/t fob Hampton Roads and $121/t fob Hampton Roads, respectively, but were down by $2.00/t and $2.50/t this week.

A Brazilian mill has issued buy tenders for low-vol, mid-vol and high-vol coals shipping in the second half of the year, closing on 6 April and 13 April. One US miner who confirmed they were participating said that the mill has reserved the right to adjust the volumes. "I wouldn't be surprised if they reduced the volume," the miner said. Another Brazilian steelmaker, Usiminas, announced that it would idle two blast furnaces this month.

Although at least one participant continued to ship into India via its local distributors as recently as Monday, US miners are worried that this will soon be impossible as the coronavirus spreads, with many Indian ports already in lockdown and some having declared force majeure on incoming shipments.

There remains a lack of clarity over the position of Indian buyers. This week an Indian steel producer was heard to have issued a buy tender seeking semi-hard, PCI and premium hard coking coal, for either April or May loading, while a few Indian buyers were heard to have started discussions with suppliers over the tentative cancellation of cargoes. This brings little comfort to US miners looking to Asia as an outlet for volumes not finding their way to Europe. "We're worried about India. Seaborne metallurgical coal needs India, even if China is the driver," said one US miner.

Priority at Indian ports has been given to the receipt of essential commodities such as oil and thermal coal rather than coking coal. Indian steelmakers are also facing challenges in continuing amid the government restrictions, despite being considered an essential service and allowed to operate.

Some US participants see China as the only viable market in Asia for spot sales, as Japan and South Korea bought more than usual in 2019 and would be getting most of what they require in term purchases this year. Some have said that this situation and the recent downward trend in prices has led Chinese buyers to bide their time with any purchases, knowing that there are few other outlets for sellers. Supply to the Chinese market is set to further increase as Mongolian coal exports to China are gradually restarting from this week.

Some participants believe that miners are given a sense of security by the fact that coke ovens must be kept running to avoid damaging them. But one miner said that said that when coke plants are running at lower capacity than normal, a lower grade of coal can be used to produce the same quality of coke if coking times are extended. "I risk losing the volumes if I don't offer a lower price," the miner said.

Most participants agree that no upturn in prices can be expected in the near future but it is unclear for how long they will continue to fall, with some expecting an equilibrium to be reached once more production has come off line.

Mine closures linked to disruption caused by the coronavirus pandemic are extending beyond the US. Canadian miner Teck will reduce coking coal production to 80-85pc of normal levels for at least two weeks and is planning to draw on its inventories to support sales. Polish miner JSW declared force majeure on some of its contract obligations late yesterday despite holding high inventories at its mines, likely because of transportation issues. Despite these closures, there is little concern in the market over tightness in the short term. "Demand erosion continues to supersede any supply issues," said one producer.