US coking coal exports to Europe, India surge; China registers significant drop

Coking coal trade dynamics of the US seem to have altered with sanctions imposed on Russian coal imports by Europe.

According to CoalMint data, the US's total coking coal exports rose by 8% y-o-y during January-August 2022 at 24.8 million tonnes (mnt), with exports to Europe rising by 26% y-o-y to about 10 mnt. The region imported about 30 mnt of coking coal annually from Russia till the last year.

In the EU region, shipments to the Netherlands, Italy and France rose by 38%, 74% and 115%, respectively, y-o-y during the period.

The EU's crude steel output in the first eight months of 2022 stood at 31 mnt, down 8% y-o-y, according to WSA (World Steel Association) data. The country's steel demand has turned quite bearish since June amid inflationary pressure and depreciating currency.

US exports to India up 170%

Despite the volatility in U.S. coking coal prices this year, country's exports to India surged by 170% y-o-y to 4.83 mnt during January-August 2022.

The top three buyers of US coking coal in 2022 so far have been SAIL (Steel Authority of India Ltd) followed by JSW Steel and RINL (Rastriya Ispat Nigam Ltd).

This came as Indian steel mills made a conscious decision to diversify their coking coal sourcing, as a part of raw material security.

India is largely dependent upon imports for coking coal requirements because of quality issues in domestic coal.

India sources a maximum of its coking coal requirement from Australia but the country's share in India's coking coal imports came down by 80% in 2021 to 72% in 2022 (January-August), as per customs data.

Russian supplies replace US coal in China

US coking coal exports to China fell by 68% for January-August 2022 to 1.79 mnt. This came due to increased purchase by China of cheaper Russian coking coal post sanctions. Russia's share in China's coking coal imports have risen from 20% last year to 35% this year.

Weak domestic steel demand is also another factor for the drop in US coal exports to China in 2022. In the first eight months of the year, China's crude steel production fell by 7% y-o-y to 693 mnt.

Although not a major supplier of coking coal to other Asian countries, US coking coal exports to Japan went up by 22% y-o-y to 2.05 mnt, whereas to South Korea imports rose by 36% to 0.63 mnt.

What lies ahead?

US coking coal output in H1 2022 was stable against last year at around 28 mnt, as per data from the Mines Safety and Health Administration (MSHA). If output continues at the same rate as the first half of the year, 2022 output should exceed 2021's by around 3-5%.

The upcoming La Nina alert in Australia is likely to limit exports from Australia, lending support to US coal exports. However, the changed trade dynamics are here to stay as long as the sanctions on Russian coal are in place.