Australian premium hard coking coal prices have continued to surge with fresh bookings in May on the back of increased spot volatility in ex-China markets.
Nevertheless, near-term demand outlook for Australian coking coal from Indian spot buyers appears bleak, given that the resurgent pandemic could well affect India’s steel production. Moreover, major steel mills have already stocked up for June and July, CoalMint notes.
- Premium hard coking coal (HCC) and 64 Mid Vol HCC grades are assessed at around $125.00/tonne (+9.6% week-on-week) and $116.75/t (+9.4% w-o-w), FOB Hay Point, Australia.
- For Indian buyers, these prices amount to $152.30/t (+4.9% w-o-w) and $144.05/t (+4.4% w-o-w) respectively on CNF India basis.
- Australia-India dry bulk freight rate is currently assessed at $27.30/t (-12.5% w-o-w) for delivery by Panamax vessel class.
Presently, the Indian market outlook for spot buying of imported coking coal is seen as modest, notwithstanding the speedy downstream steel demand recovery amid stronger construction activities through Q1CY’21.
Whilst large-scale integrated steel mills in India mostly rely on long-term contracts instead of spot purchases of seaborne coking coal, they typically venture into the spot market for procuring buffer stock at competitive prices to reduce overall raw material costs.
Currently however, Indian end-users are well stocked with as much as 60 days’ inventory at ports and plants because most of them had already procured bulk cargoes when Australian coking coal prices had hit rock bottom in the January-March quarter.
Notably, India’s coking coal imports fell by over 7% month-on-month (m-o-m) to 4.71 million tonnes (mn t) in Apr’21 due to decreased shipments from Australia among others — Indian coking coal imports from Australia registered a 10% m-o-m reduction to 3.83 mn t in Apr’21.
Over three-fourths of India’s coking coal imports originate from Australia. Besides, Australia has been the only supplier of met coal to India following China’s ban on Australian coal imports since mid-Oct’20.
The major ex-Australian coking coal supplying nations – such as Russia, Canada and the United States – are actively exporting to China as it is the best destination in terms of prices now.
Indian steel mills’ met coal import demand forecasted to decline from waning pandemic
Conditions of uncertainty and a bearish demand outlook currently prevail in the Indian market for seaborne coking coal in view of the devastating spread of the second wave of Covid-19.
The worsening coronavirus situation may impact the country’s supply chains by disrupting inland transportation and slowing port operations. Accordingly, key coking coal-consuming companies are avoiding exposure in the spot market.
Although the country’s steel production level is steady, buyers are closely monitoring the situation and might be cautious towards procurement of spot cargoes for the next few weeks.
Furthermore, narrowing coke margins in India add to downside risks for seaborne coking coal imports. As a result, upside support for Australian coking coal prices remains limited.
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