US coking coal exports surge

US coking coal exports rose by 22.6pc year on year to 36.6mn short tonnes (st) (33.2mn metric tonnes) in January-July, in part fuelled by a 133.2pc jump in volumes to India (see table).

Overall exports slipped in July on a month on month basis, but were comfortably up by 12.8pc year on year at 4.8mn st, according to data from the US Census Bureau. And recent trading activity and sentiment indicate that volumes are likely to remain robust in the medium term.

In terms of regions, Europe was the top destination for US coking coal in January-July, with volumes up on the year by 16.3pc at 14.1mn st. Volumes to the Netherlands registered a 70.5pc increase over the period to 3.2mn st, while Poland's intake was up by 62.1pc at 654,796st as regional resource depletion pushes the country's mills towards coking coal imports.

Ukraine remains a key growth market, with US exports to the country up by 56.7pc year on year at 2.6mn st. In July alone, the US exported 381,806st to Ukraine, up by 47pc month on month and a 69.5pc increase from a year earlier.

Several US coking coal producers have noted growing opportunities in central and eastern Europe, as regional steel production increases in the midst of local raw material supply limitations.

Exports to Turkey rose by 43.6pc year on year to 1.7mn st in January-July, as the country builds up steel production.

India ramps up intake

India's appetite for US coking coal has risen significantly in the past two years, with the country expected to re-establish itself as the world's largest coking coal importer this year with an estimated 59.1mn metric tonnes.

US exports to India in July were down on the month by 67pc at 258,485st, but up on the year by 56.2pc. And January-July exports to India were up by 133.2pc at 4.3mn st.

US market participants note a steady pace of enquiries for low-volatile and high-volatile coals. For pure mid-vols, India's are typically still opting for Australian specifications, but several US suppliers have confirmed selling mid-vol blends to India lately.

But US market participants note that building up sales to India is being slowed down by challenging price dynamics and negotiations.

US exporters have to compete with Australian coals on a delivered basis and Indian buyers are often driving a hard bargain, making it difficult to settle on a price that is workable for both parties, some said. The Argus daily cfr east coast India assessment for premium hard low-volatile coking coal is at $209.85/t today. The assessment for mid-volatile coking coal is at $186/t cfr east coast India.

Other US suppliers describe the Indian market as murky to navigate, in part owing to a lack of experience from some US exporters in dealing with the region, but also because the abundance of traders leads to a wider range of specifications being sought, as compared with selling directly to steelmakers with specific blending requirements.

Elsewhere in Asia, exports to China fell by 75.3pc month on month to 121,254st in July, as China's imposition of an additional 25pc tax on imports of US coal ground sales to a halt.

But the loss of the Chinese market has barely dented US sentiment, with only certain large US producers having viewed China as an economically workable market and an abundance of buyers in other countries keen to buy their coal.

Appetite for US material in other Asian markets is strong. Exports to South Korea rose by 185.3pc year on year to 432,419st in July. Exports to Japan slipped in July, but overall January-July volumes were up on the year by 3.5pc at 3.4mn st.

Brazil maintains its lead

Brazil remained the top destination for US coking coal in July, albeit volumes were down on the year by 17.9pc at 572,091st. Exports to Brazil hit almost 5mn st in January-July, up on the year by 21.1pc.

Market participants note robust demand for US low-vols in particular, with one seeing a slight shift towards more US low-vols being booked by Brazil on contract basis rather than spot.

The country's steel sector has been on growing this year, despite numerous headwinds and the steep depreciation of the Brazilian real against the US dollar since the start of 2018. All eyes are now on October's general election, which is generating widespread uncertainty, deterring investment and fuelling concerns about the domestic currency falling further.