Shanxi Coking Coal maintains low sulfur premium HCC prices for Q2 on lower supply

Singapore — China's Shanxi Coking Coal Group Monday set its low sulfur premium hard coking coal prices steady for the second quarter of 2020 from Q1, a company source told S&P Global Platts.

"The Q2 prices have been made largely steady to premium hard coking coal with a sulfur content below 1.3%, while a variety of price cuts between Yuan 20/mt and Yuan 50/mt will be made to high sulfur [above 1.3%] hard coking coal, fat coal, 1/3 coking and lean coal," the company source said.

"It was a little surprising to see a steady domestic price, given a falling seaborne market and a weak steel market distorted by the coronavirus pandemic in Q1," said a domestic trader.

Also in the news Monday, there were some individual areas of Shanxi, including Shaqu which produces low-sulfur coals [below 1.0%], announced a slight price increase of Yuan 20/mt for Q2. The company claims that the low-sulfur materials have been in greater demand due to the ongoing port restrictions which slows down the import supply of the seaborne materials, which are typically of low sulfur and ash.

Other areas of Shanxi, such as Tunlan, which produces coals of 1.3% sulfur or above, saw a price cut of Yuan 30/mt, mainly due to ample domestic supply, said the company source.

The company claims that its 2020 long-term contract volumes were estimated to total about 40 million mt, with Q2 expected to produce around 10 million mt.

Shanxi Coking Coal Group is China's largest coking coal producer, and its quarterly price announcement is regarded as the domestic benchmark price.

China is the world's largest consumer of coking coal, with an estimated 90% of consumption met by domestic supply. Market participants closely monitor the differential between domestic and seaborne coking coal prices for import arbitrage opportunities.

"I think this announcement is positive for the seaborne market, as it will support the import prices if the function of market were to narrow down the gap [of import parity]," an international trader said.

Platts last assessed the CFR China equivalent of Shanxi PLV at $188.19/mt on March 25. The domestic-seaborne price spread stood at $27.19/mt, with seaborne material cheaper.