Atlantic coking coal: Prices flat on supply limitations

US coking coal prices have held steady at the end of this week, supported by mining firms with limited inventories focusing on term sales and turning away buyers seeking discounts.

The production cuts in the second quarter and mills looking to bring forward and even increase term deliveries have meant that few mining companies appear have ready spot availability for August and September.

The Argus daily low-volatile price is flat today at $104/t fob Hampton Roads, as are the high-volatile A price, at $109.50/t fob Hampton Roads, and high-volatile B price, at $103.75/t fob Hampton Roads.

Brazilian tenders for deliveries in the second half closed last week but results are not expected for a few weeks at least, participating mining and trading firms said. "It is certainly a positive sign that the Brazilians are in the market, but when the market is looking like this, we can only hope for positive signs," one mining company said. Demand from Brazilian buyers for term contracted coal is strong, another miner said. "Our Brazilian customers are asking to bring forward planned loadings," he said.

Colombian coking coal availability is rising again, with mining outfits starting to resume operations but none are willing to accept prices of below $100/t fob Colombia, a trading company said. Met coke offers from Colombia have risen to about $230/t fob Colombia on the back of improved demand from China, Brazil and Mexico, from $210-215/t fob at the start of the Covid-19 pandemic in Europe.

Consumption in Europe is limited mostly to term contracted volumes, but mills are expected to fulfill their contractual commitments for the rest of this year, surveyed trading firms and mills said.

A tender by a Turkish mill that closed on 17 July was heard to have been awarded to a range of suppliers, with an Australian supplier having secured the premium low-volatile cargo, a Canadian producer a mid-volatile blend and US producers were awarded a high-volatile and a mid-volatile cargo each. The same Turkish mill is in the market for a cargo of met coke for delivery in early September.

A Turkish mill recently bought a cargo of Russian high-volatile material for about $85/t cfr, in line with the last deal, while another Turkish mill bought a mid-volatile blended cargo at $98/t fob US east coast.

Despite signs of recovery in the third quarter and expectations of further improvement in the fourth quarter, spot prices are doing little to encourage US mining firms to make offers. "Most US producers would not be making money at current levels unless they are in the lowest-cost quartile. We see some producers further curtailing production this year," one US mining company said. "We have turned away a mill seeking a discount as we are largely booked out for this quarter, with possibly capacity to offer low-volatile."

Domestic price negotiations in the US have begun for 2021 term supplies and offers for some buyers are due to be submitted next week. But the continued pressure on steel production margins and low seaborne prices no doubt weigh on smaller mines. "US miners with no access to the international market might have to offer at or below cost prices to secure sales," a mining firm said. "It is unlikely they will accept below cost-fixed prices for a year. We think there will be some casualties in these negotiations, and the US market could lose more production capacity."