Coal news and updates

Seaborne metallurgical prices, basis CFR China, hit the highest level in a decade on June 24, with PLV CFR China assessed at $308/mt, the highest since August 2011.

 

Market participants told S&P Global Platts that combined supply tightness and healthy demand have contributed to the market run-up.

The domestic coking coal supply has tightened, with safety checks and production maintenance taking place ahead of July 1, when China will celebrate the 100th anniversary of the Chinese Communist Party. Domestic prices for low sulfur to fat coal jumped this week, with sources indicating tradeable levels between Yuan 2,200-2,400/mt DDP Tangshan for premium coking coal with low sulfur content.

 

Platts assessed the CFR China equivalent of Shanxi PLV at $300.53/mt June 23, up $23.44/mt from the week before. The domestic-seaborne price spread stands at $2.47/mt June 23, with the domestic material a cheaper option.

 

Adding to the supply tightness is the declining Chinese import volume, which is down 43% reported for the first five months of 2020, based on China Customs data. A Chinese trader commented that, “with Australian coals continuing outside of the picture, end users have to compete price for alternative origins like the US and Canada for low-sulfur, low ash materials, which are also in relative tight supply compared to the volume from Australia.”

 

On the demand side, Chinese steel consumption is on an uptrend, with crude steel production up by 14% for the first five months of 2021, according to the World Steel Association. However, the recent trend shows that the steel mill margins are under pressure amid higher input of steel raw materials, including iron ore, coking coal and steel scrap. Based on the Platts data, the Chinese steel mill margins are estimated to be approximately $30/mt for hot rolled coil and -$4/mt for rebar, on June 23.

 

“The steel price and margins are falling at an alarming rate in China, which should make a bearish argument for the near-term price outlook of steel raw materials, including coking coal,” one Chinese trader source said.

 

Since China’s import halt on Australian coal in Q4 2020, the global tradeflow is observed to have shifted, with more North American coals moving to China as Australian materials had to find destination homes outside of China. The top brands observed on CFR China basis, based on the Platts observation, include Blue Creek 7, Oak Grove, Rustic Ridge, Raven, Standard, Leer, Pinnacle, Elkview and Affinity, no of which are Australian brands.

 

According to Platts data, there were only two encounters where spot prices breached $300/mt CFR China, which were all supply side induced. In 2011, cyclone Yasi severely disrupted the exports of Australian coals. Also, in 2016, China introduced a 276 workday policy to reduce domestic coals’ supply glut. In both cases, spot prices did not stay high for long and a period of downward correction ensued.

 

S&P Global Platts assessed Premium Low Vol up $2/mt to $184/mt FOB Australia, and CFR China was up $5/mt to $308/mt June 24.

 

Source : https://www.hellenicshippingnews.com