Australian coking coal prices to drop on imminent oversupply

Australian coking coal prices ended tad higher this week following higher transacted prices for December-laycan premium cargoes, although Chinese demand remained subdued amid new restriction on coal imports from Australia.

Until this week, Australian coking coal prices have been crashing as demand sentiment weakened amid growing panic over the impact of probable coal import restrictions in China.

Oversupply could be stemming from Chinese demand loss, weighing down on prices--

Oversupply concerns have emerged amid deferrals and cancellations of pre-contracted coal shipments by Chinese buyers, following the recently rumored import ban on Australian coals.

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.

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.

Indian market participants are also treading carefully while awaiting clarification on the rumored Chinese ban on Australian coal imports, because it will inevitably reduce demand for Australian coking coal, and near-term prices should decrease further.

Weather-related potential supply disruptions could counteract oversupply--

There is an increased risk of supply disruptions in Australia from La Nina wet weather conditions, which could reverse the negative price effects of an imminent oversupply situation looming in the Australian coking coal export market.

A sudden surge in demand for US-originated coking coals was lately being heard as Australian suppliers withheld offers citing weather-related uncertainties, especially with the high probability of cyclone La Nina severely disrupting outbound shipments from Australia.

India Coal Import Shipment Vessel Lineup

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

Price Assessments

Latest prices for the Premium HCC and the 64 Mid Vol HCC grades are assessed at around $109/t and $100/t FoB Hay Point, Australia.

For Indian buyers, these prices amount to $121/t and $117/t respectively on CNF India basis.

Australia-India dry bulk freight rate is assessed at $11.80/t for delivery by Panamax vessel class.

Near-term Outlook--

Australian coking coal prices are likely to be adversely affected in the short term, though demand has been picking up from key importers outside of China, viz. India, Japan and South Korea.

Nevertheless, the seaborne coking coal market outside Australia is expected to strengthen in the ongoing quarter amid continued recovery in steel demand from full-fledged resumption of industrial and construction activities in China.

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By Aditya Sinha