Atlantic coking coal: Europe sentiment lacklustre

US coking coal prices held steady today but European sentiment remains lacklustre and many market participants see scope for prices to soften further in the near term.

The Argus daily fob Hampton Roads assessment for low-volatile coking coal is at $173.50/t, flat on yesterday. The high-volatile type A (HVA) assessment is still at $190.50/t fob Hampton Roads, while the high-volatile type B (HVB) index is at $153/t fob.

A northwest European mill is back in the market seeking some additional coking coal following recent disruptions to its vessel arrivals, according to a US low-volatile coking coal supplier. But overall the mood in Europe is sluggish.

The same supplier confirmed that a marginal portion of its low-volatile tonnes contracted to European buyers has been pushed back owing to the region's steel market slowdown. The volume being pushed back is understood to be small and manageable.

Another US market participant said he has not experienced any pushback on supply bound for Europe, but expects to see some of this activity emerging in the coming months. There is unconfirmed talk in the market that a European mill may have diverted some cargoes of coking coal and iron ore down towards Turkey, having built up a surplus of raw materials.

"The market is going to gag on too much stock," an Atlantic market participant said, anticipating further downward price corrections and commenting that a market slowdown has been "a long time coming".

Turkey is being viewed as a key outlet in the region for a range of lower-grade coking coals including high-volatile type C (HVC), and several US producers confirm ambitions to increase shipments to the country since Turkey halved its import tax on US coking coal in May, to 5pc from 10pc.

Suppliers of coking coal to European mills are closely monitoring how their customers' margins are being squeezed, with steel prices still subdued and iron ore prices spiking. The Argus ICX assessment for 62pc Fe fines is at $113.70/dmt today, its highest level since April 2014. With this in mind, a sell-side source said US coking coal producers may be willing to come down further on price. "It's in no-one's interest to see the mills start to struggle," he said.

HVA is regarded as overvalued by some sources on both the buy and sell side, relative to prices for other US grades, and therefore this is one area that might carry potential for price cuts in the medium term. A European market participant estimated that on a value-in-use basis, European mills typically see HVA as being worth around $10/t more than HVB, compared with the far wider spreads that have become typical lately.

Meanwhile, some suppliers of Russian coal to Ukraine confirm disruptions since Moscow introduced a new permitting requirement on 1 June. "Some railcars that were loaded with coal bound for Ukraine in May are currently idled at border crossings because of the new regulation. This situation has also resulted in delays to transit shipments," one Russian supplier said.

"[Rail operator] RZD only sanctioned 12,000t of our 200,000t export application for Ukraine this month, but there is still no authorisation from Russian customs even for this small volume," another said.

That said, market participants are still waiting to see how the Russia-Ukraine supply dynamic unfolds, with many of the view that enough Russian coking coal will still make its way to Ukrainian mills. A US producer said recent enquiries from Ukraine for additional US coking coal are a case of them "fishing" to see what supply would be available if they need it, rather than an urgent pursuit of extra tonnes.