Europeans shrug off N Goonyella coking coal impact

European market participants are playing down the longer-term impact of a fire at US-based producer Peabody's North Goonyella coking coal mine in Australia on seaborne prices.

The mine was taken off line after a gas leak was identified around 20 September. Peabody reported a fire on 28 September, and said it expects no production from the site in the fourth quarter, and that it has a small amount of inventories.

The incident prompted some traders in Asia-Pacific to take positions this week, pushing the Argus daily assessment for premium hard low-volatile coking coal up by over $17/t since 1 October to $212.85/t fob Australia today.

But the company said yesterday that it has taken successful initial steps to extinguish the fire and that only a small amount of steam or white smoke is now coming out of one mine shaft.

"I would not be surprised if in a few weeks time or so Peabody comes out saying stocks are sold out and that the fire is contained," a market participant said.

A European buyer said the effect of the incident on fob Australia prices has been blown out of proportion, and that he expects the North Goonyella mine to come back on line sooner rather than later. That said, he noted that Australian premium coking coal availability had already been tight for some time.

"The impact on European customers is limited, as they purchase much less coking coal from North Goonyella than they used to, but there is a general tightness of supply," a source on the sell side said.

A Russian coking coal producer noted widely varying opinions among European customers as to the near-term price outlook, with some willing to consider higher prices and others taking a more cautious view.

The producer itself expects seaborne coking coal prices to remain robust for the time being, anticipating that pulverised coal injection (PCI) prices will rise sharply in the next two weeks, tracking coking coal with a lag.