Russian coking coal prices still aligned with Chinese market trends

• US authorises certain energy sector-related transactions with Russian banks
  
  
• Railway tariff hike in Russia unlikely to push coking coal export prices higher
  
  

Mysteel: With China's seaborne import coking coal prices still largely influenced by supply-demand fundamentals, market participants are monitoring the impact of recent developments on pricing trends for Russian coal in the Chinese market, according to a recent Mysteel report on the commodity.

This follows the 30 October announcement of the U.S. Office of Foreign Assets Control authorising certain transactions related to the energy sector with key Russian banks. This clearance, effective until 30 April, 2025, applies to the Central Bank of Russia, Sberbank, Alfa-Bank, VTB, the National Clearing Center, Sovcombank, and others.

Although this easing of restrictions on dollar transactions initially boosted market sentiment in China, Mysteel research reveals that dollar-based transactions by major Russian miners have not increased as expected. This is due to their established reliance on Chinese currency for sales into China and a need for further verification of the new dollar-denominated channels, the research suggested.

As a result, the U.S. decision is unlikely to improve the transaction convenience in the near term, though it could enhance trading flexibility in the long run, the report said.

In addition, state-owned Russian Railways recently secured approval for a 13.8% tariff increase on freight transportation, effective from 1 December this year, with an additional 10% hike on tariffs for empty railcar returns.

While these increases will raise the cost of Russian coking coal exported to China, the report suggests the immediate impact on selling prices of Russian coal will be limited due to Russia's low-cost mining methods and considerable profit margins.

"Their profit margins are big enough to digest the rise in transport costs without raising selling prices, especially large companies," the report quotes an analyst in Taiyuan in northern China's Shanxi province as saying.

Mysteel's analysis further indicates that pricing logic for Chinese imports of Russian coking coal has not shifted significantly, with current market dynamics favoring buyers. Demand for the coke-making material has weakened since mid-October, with prices of metallurgical coke already reduced twice in nearly as many weeks, the first on October 23 and the second on November 8, both by Yuan 50-55/tonne ($6.9-7.6/t), as Mysteel Global reported.

The Chinese steel mills are now angling for a third reduction in met coke prices, the steelmakers' determination to trim raw mats costs attributed to the central government's recent fiscal stimulus announcements being seen as less impactful on domestic steel demand than anticipated, the research report said.

As of November 13, Russian K4 primary coking coal (A<10.5%, V<22%, S<0.35%, G>95, Y>25, MT<10.5%) was assessed by Mysteel at $162.5/t CFR northern China's ports, reflecting a stepwise decline from $180/t on October 14. Similarly, Australian premium low-volatile coking coal (A<10.5%, V<21%, S<0.6%, MT<10%, CSN>9, CSR>70) was assessed at $220/t CFR northern China as of November 12, down from $227/t on October 16.

Trading activity at Chinese ports for spot Russian and Australian coking coal remains muted at present, as production cuts among Chinese steel mills, struggling with falling steel prices, have dampened demand, the report noted. With limited enthusiasm being generated by the government's stimulus measures, market sentiment remains weak, especially as winter is the off-season for ferrous commodities in China.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.