The daily Argus fob Hampton Roads assessment for low-volatile coking coal remains unchanged at $126 / t today, but fell by $1 / t yesterday. High-volatile A price was down $1 / t yesterday, too, but it’s still $125 / t at Hampton Roads today. But heavy discounting by some suppliers has pushed the high-volatile B price down by $4.50 / t to $115 / t at Hampton Roads.
U.S. mining companies hoping to shift HVB to a muted market have aggressively lowered their offerings to European mills. At the beginning of April, an offer by a U.S. mining company that idled its mines mostly in West Virginia was heard to be $108-110 / t for deliveries as early as May. The spread between HVB and HVA US coals has narrowed to less than $10 / t this week from the largest of $14 / t at the end of January and $35 / t a year ago. While the value in use for HVA over HVB is $15-20 / t based on industry estimates, customers who continue to use cheaper HVB coal are likely to put further pressure on HVA.
“That sort of behaviour will narrow the spread between HVA and HVB,” said one US mining firm.As steel output continues to decline and European mills want to avoid high coke inventories while keeping their coke ovens operational, HVB is preferred for its lower coke output.
In addition to the recently closed tender for second-half coking coal shipments by the Brazilian mill, there is still little European demand, with one major steelmaker reaching out to some mining companies with spot enquiries for June. But one firm was skeptical about the interest. “I’m not sure they were all that serious about buying something new when they’re long on coal,” he said.
A Turkish mill closed one of its regular tenders for a Panamax shipment of medium-volatile and low-volatile coal in June and is believed to have been awarded to one of its regular suppliers. While the availability of low-volatile goods in Asia-Pacific has been tight, with Chinese buyers showing a healthy amount of demand this week, the absence of Indian buyers from the market has continued to send mid-volatile prices downhill. “With mid-volatile bids below $120 / t for Australia, this presents us with a good opportunity for arbitration, but we just don’t have the requirement now,” said the European buyer.
While the trade flows of coking coal to Europe have slowed, they remain steady compared to iron ore, with the mills keeping their coke ovens running in spite of a string of blast furnace shutdowns since March. “We’ve certainly delayed coking coal cargoes, but the requirement remains, unlike the iron ore cargoes that we’ve been canceling for some time now,” said the mill. It comes as little as a surprise that the mills were seeking payment extensions for their purchases of raw materials over cash flow tightness. “It’s the first thing in the handbook of tricks for the procurement manager,” said one trading firm. And the mills found little resistance to their requests. “Most of the suppliers have been helpful in these circumstances, but many producers have cash flow problems themselves and are limited in how flexible they can be,” a European mill said.
