COKING COAL DAILY: Seaborne prices attractive for Chinese buyers; Japanese demand falters

Seaborne coking coal prices rose on Wednesday April 15 due to active trading in China, though demand from countries such as Japan was heard to be weak amid production cuts implemented by mills.

Fastmarkets indices
Premium hard coking coal, fob DBCT: $130.32 per tonne, down $0.27 per tonne
Premium hard coking coal, cfr Jingtang: $141.77 per tonne, up $3.14 per tonne
Hard coking coal, fob DBCT: $118.01 per tonne, up $4 per tonne
Hard coking coal, cfr Jingtang: $127.31 per tonne, up $2.58 per tonne,
A Panamax vessel of late May-laycan premium low-vol hard coking coal was sold at $148 per tonne cfr China while another Panamax vessel of early-mid May-laycan premium mid-vol hard coking coal was traded at $134.20 per tonne cfr on Tuesday April 14, Fastmarkets heard.
JFE Steel announced on Wednesday that it would halt two blast furnaces (BFs) at its west Japan operations to tackle with declining demand for steel, both from Japan and overseas markets.
The company's No4 BF located in the Kurashiki Ward will be out on maintenance at the end of April, while the company has also decided to halt its No4 BF in Fukuyama at the end of June by putting it in storage.
Earlier this month, Nippon Steel said that it will temporarily stop BF output at selected units in response to plummeting steel demand.
According to a source from Japan, domestic steelmakers may resort to selling their coking coal cargoes tied to their long-term contracts to overseas buyers, similar to the trend in the iron ore market, where offers from Japanese mills have been heard made to Chinese buyers. 
A buyer source from China predicted seaborne coking coal prices to maintain their current levels this week after he heard that there was a high chance that China domestic coke prices would increase by 50 yuan ($7.08) by next week.
On April 8, for example, several cokeries in northern China proposed to increase the coke price but the rise had not materialized yet, sources said.
“If China's domestic coke price rises, seaborne coking coal prices will be supported and stay stable longer. An increase in the coke price would imply that steel mills could afford it and domestic coking coal prices would increase, therefore, widening the gap between seaborne coking coal prices and domestic material prices," the source added. 
A miner source based in Australia said that trading in the Chinese market had been active recently due to two reasons.
“One is that the wide gap between seaborne and domestic hard coking coal prices gives an advantage to the former; the other is that demand for China’s domestic rebar has been good, which boosted steel mills’ demand for seaborne coking coal."
A buyer source from China attributed recent active trading to increased interest from buyers who deem the current price levels acceptable and due to the decreasing offer volumes for May-cargo hard coking coal, which put less pressure on miners to sell.
Meanwhile, the Indian government has been considering reopening some factories in the country from April 20, ahead of the extended lockdown to May 3, an Indian-based buyer source said.
“Despite that, I don’t hold high expectations for the coking coal market. With an economic slowdown, there are few real estate projects going on and the consumption of automobiles is low too. So demand for seaborne coking coal won't rebound for at least three months, if not for six months,” the source predicted.
A trader source based in Singapore told Fastmarkets that he thought that premium mid-vol hard coking coal prices would drop.
“With India extending its nationwide lockdown, there will be more cargoes of premium mid-vol materials spilling into China and Chinese buyers would have more bargaining power,” the trader source said.
A trader source from China countered, however, that the current prices for premium hard coking coal, including mid-vol one, are good enough for steel mills in China and that there may not be many cargoes left so prices would remain stable.
Dalian Commodity Exchange
The most-traded September coking coal contract closed at 1,124 yuan ($159.18) per tonne on Wednesday, down by 6.50 yuan per tonne.
The most-traded September coke futures contract closed at 1,700 yuan per tonne, down by 31 yuan per tonne.

Li Min

min.li@fastmarkets.com

Published

Li Min

April 15, 2020

12:05 GMT

Shanghai