Atlantic coking coal: Discounting pressures market

Atlantic coking coal: Discounting pressures market

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The spot market remains quiet amid rising coke inventories and cashflow constraints at mills. But with some suppliers eager to shift volumes as prices continue to slide in Asia Pacific owing to a supply glut, significant discounts on US coals were heard on the market in the past week.

The Argus fob Hampton Roads assessments for low-volatile and high-volatile A coking coal slipped by $1/t to $118/t and $117/t respectively, taking them $8/t below where they were a week ago. The high-volatile B assessment held at $110/t after losing $5/t on 24 April.

A US mining firm that closed most of its mines in March sold a cargo of high-volatile B coking coal for shipment in June to Italy, with some market participants saying the price may have been below $100/t fob. “There are some strange deals at present but they don’t necessarily reflect the market,” one miner said.

Another US firm, whose mines are still operating, revealed that it sold a cargo of low-volatile material to a Turkish mill for June shipment at a “very aggressive” price. Buyers who are active in the spot market are in a strong position because of the general oversupply of coal that persists as mills continue to idle blast furnaces.

But other market participants were less prepared to venture into the spot market seeking bargains. “The key in this situation is to stay on top of it with contract volumes, because spot is just a pain,” one trader said. Miners and traders say further output cuts are inevitable, as some offers heard approach cost levels of smaller US mining firms. Another participant said “there will definitely be permanent demand damage from this crisis and with some US mining firms now eager to sell cargoes because they need the cash, I’m sure there will be bankruptcies among US suppliers, although not for another six months at least”.

The reluctance of mills to build up excessively large coke inventories has led to stronger demand for high-volatile B than for higher grades. “While there are some spot opportunities for high-volatile B, we haven’t seen a lot for high-volatile A or low-volatile material. And suppliers are trying to refrain from dumping discounted high-volatile A supply,” an international trader said. But some suppliers do not have flexibility between grades and are selling higher grades at discounted prices.

China continues to be the key market for any spot sales, with Japanese and South Korean mills announcing significant output cuts. Japanese and Indian mills have been heard offering cargoes of coking coal for resale, adding to the flexibility currently enjoyed by Chinese buyers.

As Japanese mills sought to minimise costs, and growing supply availability pushed down freight rates, they have ventured beyond Australian coals to secure competitive offerings in the Atlantic. Imports of US coking coal by Japan increased by 43.1pc on the year in March to 843,417t while imports from Russia increased by 112pc on the year to 470,112t, trade data show.

More metallurgical coke has been offered into China in the past week as sellers seek to circumvent Chinese import restrictions on coking coal. As well as “very good quality” Indian coke, Russian coke is being offered “at very low prices”, a trader said.

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