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Analysis: Premium coking coal lifts up, leaves pulverized coal injection behind

London (Platts)--13 Jun 2018 839 am EDT/1239 GMT


Premium coking coal prices have surged again, boosting their premiums second-tier HCC and PCI.

On March 23, the TSI HCC FOB Australia was 2.6% below the premium benchmark, the narrowest gap seen to date this year.

Mid-tier PCI spot prices were at a 68.65% relativity to Premium HCC on Wednesday, and an average of 75% in May.

Mid-tier PCI may be used for injection, and in the coke blend, lending a tight differential with prices for low-vol PCI spot assessments, which were at a $1/mt premium over mid-tier PCI on average in May.

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Chinese restocking on favorable import differentials, and Indian spot coverage, along with caution over offer volumes from terminals fed by Queensland coal railer Aurizon bolstered the market.

Aurizon remains embroiled in a dispute with the state regulator, and is cutting coal haulage services to align with changes to maintenance plans. This is ahead of a final decision on revenue and charges, following an appeal by Aurizon.

Premium HCC's relative value lagged second-tier HCC through mid-to-end May, where spot demand was weaker, especially outside China as buyers relied on fresh fiscal-year contract volumes, and absorbed first-quarter volumes into stocks.

The price gap between premium and second-tier coals widened in the past week on potentially tighter supplies for July loadings out of Queensland, causing premium HCC's relative strength to hit new highs.

This is based on 30-day trade data, with pricing moves day by day seen in the context of trends over the time. Second-tier HCC pricing has climbed at a slower pace, while mid-tier PCI spot pricing is yet to move up in similar manner. China dominates spot trading in second-tier HCC, with low ash coal demand attracting more material to trade from the US in recent weeks.

Based on spot trade price data averaged over 30 days, TSI Premium HCC is pricing this week around 3%-3.7% above expected trading value against TSI's second-tier HCC and Platts mid-tier PCI.

When looking at the longer context of 60-day trade data, TSI Premium HCC prices on Wednesday were 3.6% above expected value, when compared to the other two grades.

Platts TSI Met Coal RSI Tracker data generates daily indexes indicating relative price strength and weakness for each coal type compared with peers over the past 15, 30 and 60 trading days.

On Wednesday, second-tier TSI HCC prices were at 2.2% above expected value on 30-day trade history, while mid-tier PCI was 4.3% below expected value, using 30-day trade data with the two coking coal grades. In May, the TSI HCC FOB Australia index has traded at an average 6.3% discount to TSI Premium HCC FOB Australia, while on Wednesday, TSI HCC FOB Australia was 9.3% lower than the premium index.

--Hector Forster, hector.forster@spglobal.com
--Edited by Jonathan Dart, jonathan.dart@spglobal.com




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