Australian coking coal prices rise marginally, US price dips by $10/t w-o-w

Australian coking coal supply tightness continues. Also, persistent restocking demand kept the coking coal market relatively strong. However, US coking coal prices fell due to weaker spot demand as Chinese bids remained limited.

On 16 Feb'22, the Australian premium HCC FOB price was at $443/t, a marginal increase of $4/t w-o-w. The high-vol HCC coking coal from USA was at $380/t, a fall of $10/t from last week.

Australian coking coal prices saw minor fluctuations post-Chinese CNY holidays but rose once again as availability of spot cargoes for the premium grade is still a concern amid Covid restrictions, labour issues and more-than average rainfall.

Buy tender concluded from India

Demand for Australian coking coal especially from India and South Korea remains strong. A reputed integrated steel mill from India concluded its buy tender for 36,000 tonnes of Australian premium low vol coking coal with Glencore at $440/t FOB basis for March laycan.

The tender was concluded between the two-named parties for the first time and was thus widely-watched by industry participants as it provided more clarity on prices.

Usually, purchase deals are finalised either on fixed-price basis or index-linked prices via contracts.

While a few market participants are sure that the prices would remain at the elevated levels in March, others are more keen to adopt wait-and-watch mode as miners would have to increase their output in March to meet their quarter and annual production guidance, which would inject more supplies and bring about a correction in prices.

Chinese demand wanes for U.S. coking coal

In case of US coking coal, demand is on then lower side, as Chinese buyers have taken a backseat amid improved domestic supplies, sufficient stock and steel output curbs due to the ongoing Winter Olympics.

In China, domestic coking coal is available cheape ragainst imported as prices of the former have seen a correction by RMB 400/t ($64/t) post-holidays and are currently assessed at RMB 3,000/t ($474/t) ex-Changzhi. Also, steel mills kept sufficient coke stock as part of restocking activity before the Chinese New Year holidays.

In addition, the country announced tighter pollution control measures during the Winter Olympics, impacting steel mills' operations and their consequent coke demand.

Outlook

In the near term, demand fundamentals for Australian coking coal are likely to remain strong. This, coupled with supply constraints, will support prices in the near term. On the other hand demand for US coking coal, from China is expected to remain restricted post Games as pollution control measures will continue. This sentiment will likely impact prices negatively.