Analysis: US met coal may focus on spot buyers, steel output falls

London — As Atlantic and global coking coal demand fell in line with weaker pig iron and steel output over the second quarter, differences in regional steel rates may push US miners increasingly toward spot-focused buyers.

Southern Europe saw the weakest pig iron rates in Q2 relative to 2019, based on World Steel Association data on July 23.

Spain, France, Italy and Bosnia, which have plants operated by ArcelorMittal, saw pig iron production, and implied iron ore, met coal and coke demand, contract by close to 50%.

Contract met coal demand into mills has been weak and some non-premium US coals have suffered, according to sources.

The uncertainty around operations at Taranto in Italy, which was recently acquired by an ArcelorMittal-led group, complicated planning for its coke blends, with a high-vol B tender heard last quarter.

Outside the EU, major spot met coal buyers Turkey and Ukraine saw steady pig iron rates in Q2, compared with Northern Europe and Brazil's heavier declines.

Turkey's pig iron output fell 7% in Q2 based on production at the Isdemir, Erdemir and Kardemir plants, which use coals from Australia and the US, such as mid-vol blends.

Ukraine's output last quarter fell 3% at plants, many of which are reliant on US met coals and buy more spot coals or met coke to enhance productivity and pig iron rates.

Pig iron output in Germany fell 30% in Q2, while the Netherlands was down 18% and the UK was 12% lower.

Contract demand for high-vol A and high-vol B has been overall steady, with a few postponements or changes to volume owing to force majeure notices in the export and North American markets, US miners said.

US pig iron rates plunged by almost half in Q2, which may have increased coals available for exports, or blending.

In Brazil, pig iron output fell 29%, as several blast furnaces were idled, including at Usiminas, ArcelorMittal Tubarao and Gerdau's Acominas unit in the state of Minas Gerais.

Brazilian mills are typically buying coal under regular tenders as well as through long-term contracts.

US coals, including high-vols and blends, compete regularly with second-tier low-vols and mid-vols from Australia, Colombia and Mozambique.