Atlantic coking coal: Rising demand supports prices

US coking coal prices edged up on indications of stronger demand for the third quarter and signs that suppliers are less willing to offer discounts that were available in March and April.

The Argus assessed fob Hampton Roads low-volatile coking coal price remained stable at $111.50/t over the past week, supported by strong demand in Asia-Pacific. The high-volatile A price increased by $1/t to $114/t fob Hampton Roads, buoyed by confidence among producers, while the high-volatile B price rose by 50¢/t to $106/t fob Hampton Roads.

Chinese customs authorities earlier this week appeared to start to clamp down again on Australian thermal coal imports. Most Chinese steel producers have yet to receive similar notices, although they have noted stricter policies on their import quotas for coking coal. The threat of the trade dispute between China and Australia ramping up and extending to coking coal may be an opportunity for US producers to further expand their share of the Chinese market.

Any restrictions on Australian exports to China would encourage Australian suppliers to seek out alternative markets, and possibly compete with US coal in Europe, India and Brazil, while weaker freight rates may further open up opportunities to export to these alternative markets.

But the Atlantic Panamax market remains weaker compared with the Pacific at present and retains a bearish outlook, with few fresh cargoes available. The US east coast to Rotterdam rate fell by 75¢/t to $5.25/t this week, taking the delivered Rotterdam low-volatile price to $116.75/t. "I think this is bad news for all. I'm not sure how China can supply that quality from elsewhere, there is not enough coal in the US to compensate. We need China and Australia to work this out," one US mining firm said of the tighter import restrictions.

Expectations for hot metal demand in Europe remain weak, despite restarts announced by automakers across the region, and steel mills do not appear to be in a rush to restart idled blast furnaces or are considering cuts to output. "I consider the recent uptick in demand to be short term, with Chinese buyers rushing to buy before trade tensions worsen. European demand is expected to remain weak," a market participant at a European mill said. "Everybody is waiting for the second half of the year with hopes of a small recovery, but it is very uncertain," a trader said. "The spot interest that has been heard for the third quarter could just be in order to check spot prices — in my view it is silly to ask for spot cargoes in the third quarter when you have cancelled them in the second quarter."

This view was echoed by a US producer that has seen limited fresh spot interest in the region. But inventory levels in the US are no longer at the highs seen in the first quarter, and some producers are more comfortable with the possibility of holding on to volumes. "The real question we are asking ourselves is do we really want to sell coal at the prices we currently see published today, or hold off until things improve," a US mining firm said.