Australian Coking Coal: Prices stagnate amid scant liquidity in China

Australian coking coal prices have remained flat for the past three weeks – across all grades, including premium low-volatile (PLV) hard coking coal (HCC) – on limited liquidity in the Chinese market and muted buying interest from India.

Chinese import restrictions and tightened port regulations limiting demand—

Chinese steel mills and traders had been largely refraining from procurement of seaborne coking coal due to the scarcity of import quotas as well as stringent customs clearance policies at major coal-handling ports.

The annual import quotas for seaborne coking coal at China’s major ports such as Jingtang and Caofeidian have been nearly exhausted, which have constrained demand for imported coking coal from end-users in Northern China.

Notably, Jingtang is one of the most important coking coal ports in Northern China, receiving almost one-fifth of seaborne cargoes.

China’s CCTD advocates tighter coal import curbs—

The China Coal Transportation and Distribution Association (CCTD) had urged for stricter enforcement of restrictions against seaborne coking coal since early May this year, after the country’s overall coal imports increased in April when imported spot prices hit multi-year lows. Despite tighter import quotas, Chinese buyers have been taking advantage by buying large volumes of cheaper priced imported coking coal.

The government-backed coal industry association, CCTD, suggested that imported coal had disrupted the domestic supply chain and put pressure on Chinese producers. The CCTD also called for authorities to strictly ensure that the existing long-term contract relationships between Chinese steel mills and domestic coking coal producers were duly honoured.

Pursuantly, China’s coking coal imports fell significantly to 4.79 million tonnes (mn t) in May, down by 23.8% from 6.28 mn t in April, according to the country’s latest customs data. China-bound shipments of Australian coking coal, in particular, witnessed a staggering decline of 53.7% to 2.07 mn t in May, as against 4.47 mn t in April.

The surge in Chinese coking coal imports from Australia seen previously during January-April this year was due to a backlog from the fourth quarter of 2019, coupled with the sharp decline in imported prices, outstripping the decline in Chinese domestic prices.

Indian Market Scenario—

Asia-Pacific coking coal markets outside China continue facing a massive setback, with no firm demand from end-users, as the coronavirus outbreak choked steel consumption and output in major steel producing countries, including India.

In India, spot trading activities for seaborne coking coal came to a standstill as most steel plants are still operating at lower capacity utilisation levels with high inventory stockpiles.

Downstream demand from steel-buying sectors such as automotive, consumer durables, construction and real estate remained subdued throughout the past quarter, resulting in sluggish demand for coking coal.

Near-term Outlook—

India’s crude steel production has gradually resumed over the past month in line with the graded opening up of lockdown restrictions. But Indian traders predict that spot demand for imported coking coal is unlikely to revive until at least the end of September, as the seasonal monsoon rains would typically slow down construction projects and weaken demand for steel-related products.

PRICE ASSESSMENTS

Coking Coal

Latest offers for the Premium HCC grade are assessed at around $115.25/t FOB Australia, while offers for the 64 Mid Vol HCC grade are assessed at around $93.35/t FOB Australia.

For Indian buyers, these offers amount to $128.00/t and $106.10/t respectively on CNF India basis.

Pulverized Coal Injection (PCI) & Semi Soft Coking Coal

[Prices in US Dollar per tonne ($/t)]

By Aditya Sinha