Chinese prices of Australian metallurgical coal have softened this week, primarily reflecting the reduced interest of domestic buyers for the coal cargoes, the findings of Mysteel’s latest survey indicate.
As of May 28, Mysteel’s assessed price of Australian Peak Downs hard coking coal (A<10.5%, VM<20%, S<0.6%, G>90, Y>19, MT<10%, CSR>70%) was unchanged on day at $258.5/t but down $4/t on week. In parallel, the price of Lake Vermont low-vol coking coal (A<11%, VM<23%, S<0.5%, G>75, MT<10%, CSR>60%) was lower by $2/t on week, both on CFR China basis and exclusive of VAT.
In fact, prices of Australian met coal in the Chinese market started softening late last week, particularly for delivery in June, as domestic steelmakers were not keen on building up their stocks for consumption next month due to lingering uncertainties about domestic steel market conditions, according to survey respondents. The mills also expect the present tightness of domestic coking coal supplies to ease next month.
Despite the new economic stimulus policies unveiled by China’s central government last week, concerns over the sustainability of rising steel prices are causing steelmakers to hesitate about raising production and lifting raw materials procurement.
For example, over May 17-23, the average BF capacity utilisation rate among the 247 steel producers under Mysteel’s regular tracking dipped 0.03 percentage point on week to reach 88.54%, while their hot metal output also dropped 0.1% w-o-w to 2.37 million tonnes/day, Mysteel’s data show.
Additionally, in June, China’s steel market is expected to experience a seasonal lull in demand among end-users, as construction activity generally slows with the rise in daytime temperatures and the arrival of heavy rains in southern China. Daily hot metal output in June could average 2.37-2.38 mnt/day, lower by 2.1-2.5% on year, Mysteel estimates.
Moreover, domestic coking coal supply seems certain to increase next month, as mining operations in the country’s top coal-mining province, Shanxi, are set to accelerate, Mysteel Global notes, assuming the provincial government ends its crackdown on overproduction by end-May as scheduled.
Besides, Australian met coal prices have also been impacted by faltering buys from Indian mills, even though India’s monsoon season will arrive in June, survey respondents said. This has also encouraged Australian coal miners to lower their offer prices to Chinese buyers, they added.
The moderate price advantage Australian coking coal enjoys over China-mined coal cargoes has improved trading sentiment. However, China buyers generally remain on the sidelines for June-loading cargoes, sources disclosed.
There are signs too that Chinese mills are actively seeking coking coal for July loading from Australia, which could underpin prices of these cargoes in the future, Mysteel Global notes.
Note: This article has been exchanged under the article exchange agreement between BigMint and Mysteel.