Spot coking coal fluctuates on higher freight;no clear quake effect
Singapore (Platts)--14Mar2011/840 am EDT/1240 GMT
Seaborne Australian coking coal prices edged slightly lower Monday,
mostly because of increased freight rates, in spite of tight supply and the
strong psychological effect of the recent settlements at $330/mt FOB
No major impact from Japan's earthquake was immediately observable.
Platts Premium Low Vol Vol and Peak Downs Region both fell by $1 on an
FOB Australia basis to $333/mt and $327/mt. HCC 64 Mid Vol was unchanged at
$304/mt FOB. Higher freight, mostly due to higher bunker rates, resulted in
increased CFR China and India prices, however.
Indicative bids and offers remain far apart. Sellers had little
motivation to drop offers below $340/mt FOB given how rare premium hard coking
coals are in the seaborne market, while buyers were struggling to accept
numbers above $310-320/mt FOB, in part because they wanted to wait for BHP
Billiton to settle its next term contracts before deciding.
"It's unfortunate, but the benchmark is now set, and I doubt any
suppliers will be offering [premium HCC] below $330/mt FOB," an Indian
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In any event, miners, traders and buyers all agreed on the scarcity of
spot tonnage available. "I would love to have spot coal available as the
prices are so high, but I just don't have any," one Brisbane mining source
The latest market tightness is being compounded by sustained rain over
the weekend Queensland. "Some main roads and highways are cut, and we've seen
flash flooding," one mining source said Monday.
In the face of resilient coking coal and comparatively weak coke prices,
Indian coke producers were considering scaling back production or shutting
their facilities altogether.
The most likely spot buyers have typically been in India over the past
few weeks, but this could be changing as both a trader and a mining company
reported that North Asian mills have expressed some interest in buying spot
tonnage for Q2.
US offers were heard broadly between $235-275/mt FOB depending whether
they were blends or straight. Traders said that because of the lack of
stockyard capacity at ports, they were typically unable to fill a whole vessel
with a single coal.
Elsewhere, there was additional clarity around the index-linked
transaction made into China last week. The late-March cargo is of BHP
Billiton-Mitsubishi Alliance's Saraji brand. It will be priced at the average
price of Platts HCC Peak Down Region CFR China during the month of March,
minus $1/mt for quality adjustment. Platts calculates that taking into account
CSR, VM, moisture, ash and sulfur, Saraji's quality discount to Peak Downs
should be $2.5/mt based on the current spot price of $333/mt FOB Australia.
MARKET STILL ASSESSING JAPAN QUAKE IMPACT
The market was scrambling to assess the ramifications of the earthquake
on steel production and coking coal shipments, but as the event was so recent,
views still diverged.
"In a more liquid market [than coking coal], we would have seen an
immediate downtrend," an Australian analyst said, citing demand lost from
idled facilities. "But as it stands, I don't think there will be much of an
impact for the met coal market." Others were more bearish, including a miner
who said he still expected some of the Japanese customers to declare force
majeure on coking coal purchases.
One clear impact will be the possible delay in both metallurgical and
thermal coal contract negotiations, both of which were ongoing when the
earthquake struck. JFE Steel, for example, has decided to cancel all meetings
with coal suppliers for the next week, a source said.
Macquarie Commodities Research estimated Friday that coastal inventories
of 1 million mt of metallurgical coal may have to be deemed unusable as a
result of the tsunami.
In terms of steel output, the limiting factor for many producers in
Eastern Japan will be the planned power outages, a Tokyo trader said. Japan's
Tokyo Electric Power Company said Monday it has begun implementation of
planned power cuts in parts of the areas it supplies from 5:00 pm (0800 GMT
),to cope with an expected spike in power usage in the evening.
The trader said the exception was Sumitomo Metals' Kashima plant in
Ibaraki prefecture, which would be likely to have reduced production
throughout Q2 2011. The mill has sustained significant damage, including at
its blast furnaces, coke oven, gas holders and port facilities.
In terms of steel demand, one Singapore trader forecast that until June,
Japan would likely export excess capacity built up because of lower demand
from power-short OEMs. From June onwards, he saw this trend reversing, with
South Korea, Taiwan and China selling into Japan to make up for a shortage in
--Julien Hall, firstname.lastname@example.org