Atlantic coking coal: Miners' outlook strengthens

Spot activity continues to be sporadic in the Atlantic coking coal market, as participants hope that early signs of a stronger third quarter in terms of volumes will be borne out. But China's import restrictions are seen as a factor that could weigh on a potential uptick.

US coking coal prices moved up today, with the Argus daily assessment for low-volatile coking coal up by 50¢/t to $107.50/t fob Hampton Roads, while the high-volatile A and B assessments rose by $1.50/t to $113/t and $107/t fob Hampton Roads.

"I did not think recovery would come quite so early. But we are seeing car and pipe manufacturing recover when not so long ago the expectation for end-users was to be running on inventories for awhile," a US mining firm said.

A Turkish mill with a tender for two high-volatile cargoes and two low-volatile cargoes bought two Russian high-volatile cargoes for $85/t cfr Turkey, as reported earlier this week, and three cargoes from a US mining firm, including mid-volatiles and low-volatiles, at less than $100/t fob Hampton Roads. "It was probably the lowest deal we will have done, although the relativity was strong if you add on the 5.5pc Turkish import tax and the freight rate, which we paid. It was a win-win. They did not need an extra vessel and it provided some relief with inventory, but we will be able to walk away from deals like that in the future," the mining firm said.

A Brazilian mill has a tender for a 25,000t cargo of high-volatile A coking coal for August-loading, while another Brazilian mill is expected to be in the spot market for high-volatile A material in the third quarter after recently closing a tender seeking low-volatile material.

Latin American longs producer Gerdau's announcement that it will restart blast furnace 1 on 1 July has also contributed to cautious optimism among suppliers who sell to Brazil. "Construction and white goods in Brazil have held up much better than I expected," a US mining firm said. "Until a few days ago, I thought Brazil was still searching for a lowest point, but now I think they have found one. Most big mills will remain cautious, which will hopefully encourage some stability."

Some participants are seeing "almost normal schedules" from Japanese and South Korean buyers for the third quarter, and one mining company said it had started discussions with at least three Indian buyers. "The pricing is low and it is hard to do business, but it is a good sign," it said.

Plenty of uncertainty remains over China's import restrictions and the lack of clarity over what direction they will take. "First it is just Australia, then it is the US, then it is Australia and Russia. The quotas seem to come and go and nobody knows exactly which coals they are aimed at," a global trading firm said. "China in July will really affect the game; if it is strict with quotas, then Australian mining firms will flood the European and South American markets with whatever they can ship."

A renewed spike in Covid-19 cases in the US has prompted fear among some buyers that supply may be disrupted. "I do not think that supply will be disrupted," a US mining company said. "But there has been a psychological shift after demand was the only worry for many weeks."

Some participants expect further mine closures in the US, with several producers operating below costs for a sustained period.

Ongoing steel production cuts in Europe have meant that merchant coke from CIS and Polish producers are turning to the more lucrative Chinese market where domestic prices continue to be strong. A recent offer for Polish met coke was heard at €160/t delivered to Duisburg, equivalent to $130/t ex-works in Poland. "If I could, I would buy the cheap coke and store it but we are under strict cash management at the moment and a purchase like that would not be approved," a northern European mill said.