US coking coal demand, prices to rise in 2019: Corsa

US producer Corsa Coal expects market conditions to remain strong in the next year, with the export outlook robust and domestic coking coal prices poised to rise for 2019.

The company anticipates growing demand from US customers as they prepare to increase blast furnace output in both 2018 and 2019, with domestic spot enquiries indicating the already-high level of buying interest and further tightening supply chains.

With the supply-demand balance strained, several US buyers have started their negotiations for 2019 contracts earlier in the year, Corsa noted. Market participants told Argus the first 2019 contract settlements will be finalised in early-September, citing price ranges under discussion of $100-120/st at the mine for low-vol material, $120-135/st for high-volatile type A (HVA) and $105-110/st for high-volatile type B (HVB).

The domestic low-volatile coking coal market is particularly tight, with production interruptions at existing operations having significantly impacted supply, Corsa said. In particular, market participants are now waiting for confirmation of whether the Pinnacle mine in West Virginia will close, after a Worker Adjustment and Retraining Notification (WARN) notice was issued on early-August.

Looking to the export market, Corsa expects seaborne coking coal prices to remain volatile as trade discussions generate global uncertainty. But overall it anticipates a fairly healthy price environment in the medium term. "We expect pricing to stay above the 90th percentile of the global marginal cost curve over the coming quarters, which we believe to be $150 per metric tonne," the company said.

Overall, Corsa sold 392,334 short tonnes (355,919 metric tonnes) of coking coal in April-June, up by 6pc from a year earlier. For the January-June period, low-volatile coking coal sales were up on the year by 25pc, with total coking coal sales up by 45pc year on year at around 950,000t.

"We are currently in a sold out position through November, and for the year are 94pc committed with our existing order book," chief executive George Dethlefsen said.

Corsa achieved an average selling price (ASP) of $115.52/t for coking coal in the second quarter, down slightly from $118.46/st in the previous quarter. This equates to $160-166/t on a fob vessel basis, and reflects a sales mix of 25pc to domestic customers and 75pc to overseas buyers.

But despite strong sales and prices, Corsa continues to encounter challenges owing to the over-stretched US supply chain and extreme congestion at ports, with many producers having problems in getting their coal to market. Corsa incurred demurrage expenses of $1.5mn in the second quarter, and had several trains delayed into the third quarter.

Guidance trimmed further

Corsa has once again lowered its production guidance for 2018, having encountered geological problems at two mines earlier in the year.

The new production guidance stands at 1mn st for 2018, down from the previous guidance of 1mn-1.2mn st. The total coking coal sales guidance has been revised to 2.1mn-2.3mn st from 2.1mn-2.8mn st.

That said, the production outlook is stabilising, with work completed at the Casselman mine to establish a connection to the northeastern reserve base. Meanwhile, the ramp of the Acosta mine is now finalised, with the project hitting its full run-rate in June.