Atlantic coking coal: Prices edge down

US coking coal prices tracked downwards today, weighed down by the absence of spot demand in Europe and continued weakness in Asia-Pacific.

The Argus daily fob Hampton Roads assessment for low-volatile coking coal edged down by 50¢/t to $102.50/t, as limited interest has pushed down market indications. The high-volatile A assessment fell by $1.50/t to $106.50/t, retaining a substantial spread with high-volatile B, which is stable today at $89/t after a significant drop at the end of last week.

Some US mining companies are selling below cost to generate cash, while weak demand means that few profitable spot deals are being done at the moment. "At the level of pricing we've seen recently, I'd say about 20pc of US miners can make money on the seaborne market; I wouldn't expect that people are trading significant volumes at this level," said a trader. "We have received opening offers for high-vol B coals at $90/t fob Hampton Roads so I'm not surprised to hear offers being made by a US miner at $86-88/t," said a European mill. "But we have no demand with our blast furnace and coke plant running at their lowest level."

But overall market sentiment is still positive, with market participants having an eye on slow recovery in the Atlantic. "There is a chance that we might have some spot demand in the fourth quarter after the September shipments," said the mill.

Suppliers are also heartened by European mills fulfilling their third-quarter contractual commitments after a difficult first half, when they faced requests to delay shipments or buyers declaring force majeure.

The US low-vol sector has also been feeling the pressure of weak spot demand. "With many of the South American spot tenders having drawn to a close, there is not a lot of demand for US low vols at the moment," said one miner. "But we're not in a rush to shift cargoes either and prefer to wait out this low."

While China might have been an outlet in the past for some US low-vol coals, recent political tensions between the US and China have affected the attractiveness of these deals.

The bulk of submissions for 2021 US domestic coal offers to mills are taking place this week. Participants expect domestic contract negotiations to settle at a $15-20/t discount to last year's pricing, and weak pricing in both the seaborne and US domestic segment is expected to cause further bankruptcies among miners higher up on the cost curve. "In previous years, people may have thrown money into high-cost operations to keep them afloat," said one trader. "But now companies are much more at risk because of a lack of access to capital; private equity firms and hedge funds are going to be much more cautious."

The US east coast to Rotterdam coal Panamax rate rose by 50¢/t to $10.50/t this week on the back of tightening tonnages. The delivered Rotterdam price is $113/t today, down by $1/t from a week ago, pushed down by the absence of spot interest in the region.