Coal news and updates

TRADE REVIEW: Asian met coal could ease in Q2 on higher supply, mixed Chinese demand outlook

El Nino expected to improve Australian supply

PLV-PMV spread to widen upon China's return

Russian trades to Asia to continue for weak grades

This report is part of the S&P Global Commodity Insights' Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts, to new arbitrages, and to quality spread fluctuations.

Asian metallurgical coal prices are expected to soften in the second quarter as supply disruptions in Australia are set to ease on warmer weather, while China's demand outlook is mixed amid uncertain steel requirements and the country resuming Australian coal imports after a near two-and-a-half-year pause.

The benchmark Platts premium low-volatile hard coking coal prices, on FOB Australia basis, averaged $343.91/mt in Q1, up from $278.13/mt in the previous quarter, showed data from S&P Global Commodity Insights.

Chinese steelmakers have indicated that they would be open to buying more Australian material in Q2, but added that it would depend on a workable arbitrage emerging between seaborne and domestic PLV as domestic prices have been under pressure since March.

Chinese mills' appetite for coking coal imports will depend largely on steel demand and prices. Margins for steel saw increased pressure in early-April amid production that grew on the year over January-March and a slow recovery in demand.

There is likely to be some pent up demand for steel from the country's property sector in early-Q2, following a subdued previous quarter amid the latest COVID-19 outbreak. However, this may not be sustainable and China's National Development and Reform Commission has asked for feedback from mills on output cuts for 2023.

Chinese mill margins for hot-rolled coil and rebar were at minus $22/mt and minus $19/mt, respectively, as of April 17.

Southern China is also expected to see heavy rains and flood in June, which will slow down construction activity and pose another downside risk to demand.