Colombian coking coal, met coke under strain

Colombia's coking coal and metallurgical coke producers have been feeling the pressure from the recent downturn in fob China met coke prices as well as growing competition from Russia and the US.

"The [domestic] coking coal market is falling precipitously," one Colombian market participant said, adding that mid-volatile blends are currently available at around $95/t ex-yard but this price could soon drop to as low as $61/t.

A Colombian trader agreed that domestic coking coal prices have dropped in recent weeks, but said the situation has now become more stable and the rate of decline has slowed, adding that he would be surprised to see prices come down much further.

This price drop is largely underpinned by met coke trends, with Colombian exporters having had to cut their met coke prices in the past two months owing to the recent slump in fob China prices. The Argus daily fob north China index for 65 CSR met coke fell by $102/t between 1 November and 11 April to $299/t. It has since recovered somewhat to $323/t fob north China.

A market participant put Colombian export met coke prices in a $295-305/t fob band, depending on grade.

Colombia's met coke exporters are encountering growing competition from Russian suppliers that are enjoying cheaper freight into Europe. Low freight costs have been facilitating various trade options for Russian coal and coke, with one South American source noting that Russian anthracite shipped from Baltic ports to South America has lately been able to undercut equivalent anthracite grades from more nearby suppliers in Peru.

With prices down and overseas demand weaker in some regions — including Europe — some Colombian coke production has been reduced, with one source noting some coke plants turning off certain ovens. But not all coke products are being affected by these steps. "[Blast furnace] met coke production was not strongly impacted, but nut coke production has been reduced in the past few weeks, due to weaker demand that exporters are facing at this moment," another local market participant said.

This year's more challenging conditions contrast with a particularly strong 2018 for Colombian met coke, which saw producers restart some idled capacity and exports hit a record high of 3.1mn t, up from 2.5mn t in 2017.

Colombia's export coking coal prices are currently caught up in slightly different dynamics, more closely tied to wider seaborne trends and Asia-Pacific fundamentals. Colombian suppliers adopt various approaches to export pricing but it is not uncommon for discounts to be calculated against low-volatile fob Australia indexes, which have lately held fairly steady. The Argus weekly fob Colombia index for mid-volatile coking coal was last assessed at $171.50/t.

The country's coking coal exporters are also facing strong competition as various suppliers of second and third tier grades compete for sales. Colombian market participants note particularly tough competition from Russian and US coking coal exporters, with more of the latter now being bought by some regular Turkish customers of Colombian material, a market participant said.