London, 19 September (Argus) — Producers of coking coal and met coke gathered at the Eurocoke conference in Amsterdam this week, competing for buyers in a market strained by new supply and weak demand.
US coking coal producers have lowered their prices steadily since March, although some hoped that the market would stabilise as mining accidents and bankruptcies tightened supply. But with the lowest US coking coal prices in five years and an estimated 7mn t/yr of high-volatile coal capacity coming on line in the next year, suppliers have mostly let go of this short-term optimism.
US producer Warrior started selling product from its new Blue Creek 1 high-volatile coal mine in the second quarter, which it says will reach a capacity of 5.4mn t/yr in the next few years. Another producer, Allegheny Met, restarted its high-volatile coal longwall this month and hopes to produce around 3.5mn t/yr. Core Natural Resources has not yet given a restart date for its Leer South mine, which it shut after a fire in January, but market expectations are veering towards a restart in the first quarter of next year.
Leer South could add up to 4mn t/yr to the high-volatile coal market when it comes back on line, although it was putting out around 2mn t/yr before the fire.
“We will be competing directly for those tonnes,” one US producer said of the incoming capacity, adding that some firms with higher ash and higher sulphur content coal would have to discount to the price of Core’s Leer high-volatile A and similar quality coals.
The Argus US high-volatile A coking coal fob Hampton Road assessment now sits at $/t, with high-volatile B at $/t, the lowest since December 2020.
High-volatile B producers are struggling the most on margins, market participants said. “I wouldn’t be surprised if [some high-volatile B producers] don’t make it through next year,” a US supplier said this week
Producers of low-volatile coal are also selling at prices near five-year lows, with the Argus fob US east coast assessment at $/t today. Traders in Asia-Pacific have speculated heavily on premium low and mid-volatile coals from Australia over the past two months, sometimes propping up US prices. But buyers have been slow to pick up these cargoes, leaving traders with large volumes of unsold coals and a downward price pressure in key US markets like India.
Japanese-Australian joint venture BHP Mitsubishi Alliance (BMA) will pause operations at its premium low-volatile Saraji mine in November, the firm said this week, taking a capacity of 8.1mn t/yr off line. The move may support prices for low-volatile coals, although BMA says it will increase production at lower-cost mines, leaving its yearly guidance unchanged at 36-40mn t.
Producers outside the US and Australia also need to move cargoes. Colombian suppliers are offering to Indonesia and South Korea at discounted prices, while Canadian firms are pushing record tonnes of coking coal into China and pulverised coal-injection (PCI) from as far as western Canada to Ukraine.
A large Chinese producer was also present at the conference this week seeking new European buyers for Chinese coking coal, anthracite and met coke. The arbitrage between seaborne and domestic prices in China makes selling to Europe highly attractive, the producer said.
In the met coke market, producers are having trouble finding buyers at any price.
Most steel mills in Europe are operating well below capacity and see no need to buy extra coke, while Brazilian mills are producing more coke.
A coke producer from Indonesia offered low prices at the conference this week, telling Argus he could afford to sell lower than Colombian suppliers and at near or below cost, with the strong financial backing available to Indonesian met coke makers.
Coking coal and met coke suppliers are now in a race to the bottom, conference participants agreed, and producers with higher costs or less financial backing may struggle to survive.
By Austin Barnes
