Atlantic coking coal: Prices edge lower

US coking coal prices are being pressured by limited third quarter demand in Europe and weak fundamentals in Asia Pacific. But expectations of further recovery in the Atlantic in the fourth quarter, and European demand reaching beyond term commitments have given mining firms and suppliers cause for optimism.

The Argus daily fob Hampton Roads assessments for low volatile coking coal is unchanged today at $100/t, having fallen by $1.50/t yesterday. The high-volatile A price stands at $102/t fob Hampton Roads today after dropping by $3.50/t yesterday, pushed down by a recent deal for a September cargo bound for Europe. The high-volatile B assessment remains at $89/t fob Hampton Roads.

The seaborne market has largely been weighed down by the absence of Chinese buyers restricted by import quotas, lacklustre North Asia spot interest and recovering Indian demand. This has meant European mills with the capacity to pick up spot cargoes have been able to secure competitively priced cargoes for delivery in September and possibly early in the fourth quarter. A Europe-based buyer secured a 90,000t cargo of Peak Downs loading on 10-19 September sold at $107.50/t fob Australia, about $1.50/t lower than a similar cargo traded last week and a 75,000t cargo of Riverside loading on 10-19 September, at $99.50/t fob Australia — the first trade below $100/t fob Australia since late April. The buyer recently secured a cargo of high volatile A at $100-101/t fob Hampton Roads for delivery in September.

But some companies have held offers firm despite lower offers being made by their peers. There are US producers that will not be able to make money at current levels, one mining firm said.

While mills still have high iron ore prices and a lower than hoped for uplift in steel prices keeping them below breakeven levels, some are seeking to pick up cheaper coking coal cargoes before the anticipated return of Chinese buying later this year ahead of fresh import quotas being issued. "Steel prices have risen but customers are not willing to pay high enough prices and that leaves us struggling with our margins," one steelmaker said. "But we are trying to buy from time to time, particularly during this low in the market."

Russian producers are offering aggressively for volumes into China, despite some uncertainty over depleting import quotas. "They do still have availability, but now it is a game of understanding what grades you can work with," a trader said.

Traders seeking to offer resold European met coke cargoes to China are running a considerable risk, according to some participants. "If the Chinese government suddenly decides to cut the price of domestic coke, that change would happen very quickly, and then you are left making a loss," a trader said. "Chinese demand is strong but very volatile."

A northwest European mill said it could have sold a coke cargo to a Chinese trader at $240-245/t cif China.

Tightness in the Atlantic basin has pushed up freight rates in the past week. The coal Panamax rate for US east coast to Rotterdam rose by $2.50/t to $14.50/t early this week, taking the delivered Rotterdam price to $114.50/t, up $1/t from a week ago.