The landed prices of seaborne coking coal into China touched multi year high on 24 Jun’21 with the benchmark premium PLV CFR China hitting above $300/tonne (t), the highest since Aug’11.
Imported coking coal prices to China had been heading northward since the country imposed the ban on Australian coals since Nov’20, although Chinese traders had started avoiding the material from Down Under from Oct’20 itself. Little did suppliers know that this ban would change the trade dynamics in the days to come.
What led to the price rally?
The Australian ban was the initial trigger for the price escalation in seaborne coking coal to China, which started scouting for other supply sources. In stepped Mongolia, Russia. Mozambique, the US and Canada among others.
Australia’s exit also allowed re-sellers from other countries to book Australian cargoes and then sell to China at a premium. “Changing two-three trading hands mounted a premium on this material and increased the end-pricing,” said a source.
Around Dec’20, suppliers from the US, who held term contracts with European buyers, found the latter negotiating hard to decrease their cost of the raw material. European buyers suggested to US suppliers that they should divert the same quantity committed to them towards China at a premium of $50/t while they would look Australia-ward to source at $50/t less.
Although China is buying coking coal from ex-Australia suppliers, SteelMint understands these countries are not being able to bridge this supply deficit fully, which is leading to the price rally. “The domestic consumption of these supplier- countries post-Australia ban has also increased as they are trying to resume economic activities despite the pandemic. As a result, they are not in a position to supply in huge volumes to China, which is pushing up prices further,” revealed the source.
Domestic coking coal supply has also tightened, with safety checks and production maintenance taking place ahead of the celebrations on July 1, to commemorate the 100th anniversary of the Chinese Communist Party.
Imports of coking coal down
As per SteelMint data, China imported 3.41 million tonnes (mn t) of coking coal in May’21, a drop from 3.48 mn t in Apr’21 and a far cry from the peak of 9.07 mn t in Aug’19 since 2017. Imports fell from 5.9 mn t in Oct’20 to 3.72 mn t in Nov’20, when the ban on Australian coal set in.
Import volumes are down 43% for the first five months of 2020, as per the China Customs data.
Pricing
The CFR China equivalent of Shanxi PLV was at $300.53/t on June 23, up $23.44/t over the previous week.
Domestic prices jumped this week to Yuan 2,200-2,400/mt DDP Tangshan for premium coking coal with low sulphur content.
The domestic seaborne price spread stood at $2.47/t on June 23, with the domestic material a cheaper option.
Prices as on 9:00 IST, 28th June. d-o-d changes indicated against closing price of 25th June
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