Atlantic coking coal: Prices flat amid China concerns

The optimism that emerged among US coking coal producers following the signing of the interim trade deal between the US and China two weeks ago has been somewhat dampened this week by the extended lunar new year holiday in China and concerns that the spread of the coronavirus may hurt Chinese steel demand.

The Argus daily fob Hampton Roads assessment for low-volatile coking coal in the US is flat today at $131.50/t, as are the high-volatile type A daily price at $138.50/t fob Hampton Roads and the high-volatile type B price at $124.50/t fob Hampton Roads.

But any real impact of Chinese demand on the Atlantic market is still very much limited by how much trade flows have slowed since August 2018, when the Chinese government imposed retaliatory tariffs on US coal imports. Still, with European demand having declined over the last year and expected to be slow at least even in the first half of this year, the potential return of China as a destination for US coking coals was very much welcome news to miners. Some US miners have been expecting China's tariff of 25pc — nearly 29pc after accounting for port fees and related costs — to be lifted as soon as 15 February. But recent events have thrown some uncertainty on these hopes.

"I have one or two US producers with offers ready for the Chinese market," one Europe-based trader said. "But Chinese buyers are only willing to start discussions after tariffs are lifted."

US producers also have their eye on term tenders from Indian mills and ongoing discussions with European mills for annual contracted shipments starting in April.

More mine closures announced this month in the US also point to further tightening of supplies in the US. Regulators in the state of Kentucky have suspended the licences of four coking coal mines in Perry and Pike counties operated by US producer American Resources over a failure by the company to pay workers. The Chapter 11 filings and mine closures announced over the course of 2019 and early this year are estimated to have already reduced US coking coal output by nearly 8mn t/yr.

Weak coal and grain exports alongside strong tonnage supply in the Atlantic basin have pushed down Panamax rates this week in the Americas coal freight market. The US east coast to Rotterdam rate stands at $10/t, down by 75¢/t from a week ago.