The Argus assessment for premium low-volatile hard coking coal fell to $121.45/t fob Australia today, the lowest level since prices dipped below $100/t fob in 2016 and down by 25.4pc from a peak in March.
Steel production cuts in US and Europe have led to coking coal output cuts of at least 20mn t/yr in US and Canada. Steel production cuts in Asia have not led to responding wave of coking coal output cuts in Australia, where production has already been slowed by wet weather in Queensland.
The latest fall in seaborne prices has come as steel mills, usually buyers in the spot market, have emerged as sellers.
At least two Indian steel producers offered premium mid-volatile cargoes for May loading to China, along with an assortment of other coking coal grades including pulverised coal injection grade and semi-hard coking coal. A mill sold to a Chinese trading firm today a Panamax cargo of Goonyella for loading during 5-14 May at $110.50/t fob Australia, $15-20/t lower than the last done trade for a similar cargo about two weeks ago.
Steel producers in northeast Asia were also scouting around for indicative bids in the Chinese market earlier this week, but were similarly disappointed to find them below their costs.
Some Australian and Russian coal producers are just starting to consider output cuts in response to the slump in demand, although few have officially announced them. Most are still weighing their options among various potential moves to make, some of which includes delaying expansion plans and sustaining capital expenditure.
Some market participants have warned that the seaborne coking coal market is just starting to see the start of a surplus. Mills may shed volume commitments in long-term contracts to add more spot supplies.
“We have not even factored in the fact that many steel producers have not started negotiating for their contract volumes to be cut. The bulk of that will start around June,” an Australian trader said. “Once that happens, we expect to see an even greater surplus of cargoes rolling into the spot market.”