Atlantic coking coal: Offers strengthen

Cautious optimism towards European steel demand recovering further in the fourth quarter has encouraged some traders to start pushing up their offers for US coking coal this week.

But at least one mill was heard to have still secured September loading high-volatile B coal below $90/t fob Hampton Roads this week, pointing to the continued presence of a supplier or miner still holding considerable stocks.

The Argus daily fob Hampton Roads assessment for low-volatile coking coal held steady at $106/t today, while the high-volatile A price rose by $1/t to $109/t fob Hampton Roads, buoyed by signs of further supply tightness to come. The high-volatile B price edged up by $2.50/t to $97/t, reflecting the continued gap in price ideas between buyers that have secured September loadings at $88-92/t this week and fourth-quarter offers from traders reaching towards $100/t.

While steel prices in Europe are rising, the pressure of raw materials costs remains on mills as iron ore prices rise. "The mills are trying to ramp up coil prices but their margins are still not improving enough. Everything has been eaten up by iron ore," said one mill. The Argus ICX 62pc index rose by $2.60/dry metric tonne (dmt) today to $128.70/dmt cfr Qingdao, up from $99.95/dmt at the start of June, while the 65pc index was up today by $2.05/dmt to $140.90/dmt.

As a result of capacity cuts since the second quarter this year, overall US coking coal supply availability is expected to face limitations going into the fourth quarter, particularly if mills are seeking to increase steel output. At least one major US high-volatile B producer has not been participating in the spot market since the start of this quarter. Another miner voiced scepticism over there being many discounts still on offer, with the 2021 domestic settlements for high-volatile B at around $121-125/t fob US east coast. "I cannot fathom why anyone would be discounting right now," the miner said.

The return of steel demand has no doubt encouraged the restart of blast furnaces in Europe and north Africa. But this has unexpectedly for some led to a met coke shortage emerging this week for certain mills. Strong demand from Chinese buyers willing to pay higher prices has also meant that producers diverted cargoes from traditional destinations earlier this year to China. "Coke is difficult to get in the market at the moment because Colombian producers have sold out and Polish producers have sold a lot of cargoes to China," said a trader. But one European mill plans to offer some met coke to a trading company to be sold to Asia.