Australian coking coal prices have seen further downward momentum over the course of the week, with prices across all categories hitting multi-month lows, as subdued demand outlooks persist globally amid multiple lockdowns across numerous countries aimed at alleviating the coronavirus (Covid-19) pandemic.
Yet, this sharp collapse in coking coal prices has failed to offset the dramatic drop in demand, as buyers defer purchases due to high inventory levels because of the widespread production cuts to steel output.
At this juncture, China is the only viable market in Asia for spot sales of Australian-origin coking coal, with steel mills outside of China struggling with depressed demand and the resulting buildup of raw material inventories due to lack of downstream activities following lockdowns across several major export destinations in the Asia-Pacific region.
In these fragile times, China has continued to be the sole bright spot for seaborne coking coal demand since early April, when Beijing removed all transportation curbs in Wuhan, following 76 days of lockdown, and thus lending support to steel demand and economic sentiment in China. But still the Chinese coking coal buyers have largely remained on the sidelines with expectations of further falls in near-term prices.
Apparently in China, there remains a lack of clarity over market expectations on coking coal prices after the country’s gradual recovery from the deadly viral outbreak in the past month. Although most participants agree that no upturn in prices can be expected in the near future, it is uncertain for how long they will continue to fall, until they reach an equilibrium of supply equating demand.
Meanwhile, Indian spot demand for seaborne coking coal has perceptibly faded away following the enforcement of the nationwide lockdown effective from March 25, and now extended until May 3. The country’s ongoing lockdown has significantly disrupted incoming shipments from overseas coal suppliers, with several major coal-handling ports having declared force majeure. Such port restrictions have been exacerbated by transportation disruptions and labor shortages, with many workers having returned to their hometowns. Also with the Indian ports prioritizing on the receipt of essential commodities such as oil and thermal coal rather than coking coal, steelmakers are facing challenges in continuing to operate amid the government restrictions.
Nevertheless, some Australian coking coal producers believe that easing lockdown restrictions and diminishing Covid-19 infection and mortality rates in certain countries point to the possibility of coking coal spot demand returning as soon as the end of May.
PRICE ASSESSMENTS
Latest offers for the Premium HCC grade are assessed at around US$ 109.00 per tonne (t) FOB Australia, which’s lower by US$ 17.00/t than the average rate of US$ 126.00/t prevailing during the week gone by (20th – 24th Apr’20).
Offers for the 64 Mid Vol HCC grade are presently assessed at around US$ 88.70/t FOB Australia.
For Indian buyers, the above offers amount to US$ 117.00/t and US$ 96.70/t respectively on CNF India basis.
Pulverized Coal Injection (PCI) & Semi Soft Coking Coal
| FOB Australia | CNF China | CNF India | |
| Low Vol PCI | 67.20 | 74.50 | 75.20 |
| Mid Tier PCI | 64.20 | 71.50 | 72.20 |
| Semi Soft | 62.20 | 69.50 | 70.20 |
N.B.: All prices are in USD/MT
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