Australian coking coal prices retreat on subdued buying, ample supply

Australian coking coal prices continued their downward trajectory for yet another week on limited buying interest despite ample supply availability in the Southeast Asian markets.

While Chinese steelmakers stayed on the sidelines awaiting clarity on port restrictions, ex-Chinese steelmakers showed no urgency to book cargoes in hopes that offers could fall further in light of the current market weakness.

Meanwhile, oversupply concerns have emerged following deferrals and cancellations of pre-contracted coal shipments by some buyers in China, following the recently rumored import ban on Australian coals.

Despite several November laycan cargoes of Australian premium coking coals being offered at competitive prices, there is no incremental demand to liquidate the excess supply.

This is because there has not been any significant improvement in steel product sales across major countries importing coking coal from Australia, viz. Japan, India and South Korea.

Japan's Oct-Dec steel output set to fall by 11%

Steel production in Japan during April-September, the first half of the country's current fiscal year, plunged by 26.8% year-on-year to 37.1 mn t, according to the latest data released by the Japan Iron & Steel Federation on October 22.

In addition, Japan's production of crude steel in October-December is projected to fall by almost 11% to 21.1 mn t from a year earlier because the continued impact of Covid-19, according to the ministry of economy, trade and industry (Meti).

India's steel demand likely to fall by 18% in 2020

In response to the import restrictions in China, expectations are rife that more of Australian coking coal could possibly be targeted toward India.

India at this moment, may have limited capacity in absorbing the surplus as the country's steel demand is predicted to face a sharp decline despite recent recovery from automotive and white goods sectors, and government infrastructure projects.

Besides, majority of the Indians only buy small volumes of seaborne coking coal from the spot market as the country's largest steel manufacturers source coking coal through fixed-price long-term contracts.

US coking coal prices descend in line with declining Australian prices

US coking coal prices have started descending in a bid to compete with lower offers from Australian suppliers seeking to divert China-bound cargoes following the rumored ban on Australian coal imports.

Nevertheless, a surge in demand for US-originated coking coals was lately being heard as Australian suppliers withheld offers citing weather-related uncertainties.

India Coal Import Shipment Vessel Lineup

CoalMint's latest vessel lineup data (as on 21 Oct'20) reveals that a total quantity of 837,790t of Australian coking coal is expected to reach various Indian ports by 30 Oct'20 incl. 259,500t at Dhamra (Odisha), 74,524t at Gangavaram (Visakhapatnam), 116,266t at Haldia (West Bengal).

This apart, a 30,000t coal shipment of Australian PCI is also expected at Haldia port.

Price Assessments

Latest prices for the Premium HCC and the 64 Mid Vol HCC grades are assessed at around $109/t (-$11/t w-o-w) and $102/t (-$5/t w-o-w) FoB Hay Point, Australia.

For Indian buyers, these prices amount to $122/t and $114/t respectively on CNF India basis.

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By Aditya Sinha