Stronger global coking coal market for longer on supply deficit: Alpha

US coking coal miner Alpha Metallurgical Resources said it expects stronger global coking coal prices for longer, on a broader supply deficit and strong met coke and steel demand.

Met coal supply will remain tight, as companies are unable to ramp output up to the same degree as in previous market cycles, Alpha's executive vice president and president of Alpha Coal Sales Dan Horn said in a presentation. Alpha plans to sell around 14 million st of met coal in 2021, close to its annual capacity, and 15.5 million st in total.

Strong demand for steel and raw materials is seen as the recovery continues after the COVID-19 pandemic, lifting steel markets further, he added.

"We're certainly seeing a lot of positive signs for a change in the seaborne met market, that in our opinion will continue to strengthen in these markets at least to the end of this year, if not further," Horn said at the Platts Singapore Coking Coal Conference on July 15.

Australian benchmark premium low-volatile coking coal prices have doubled since early May to over $210/mt FOB Australia in mid-July, catching up with higher US coal prices. US low-vol coking coal saw premiums of 26% to Australian premium HCC on average over the first half of 2021, stoked by spot demand in China. Beijing restricted coal imports from Australia since late Q4, forcing mills to depend more on coal from US, Russia and Canada. Contract US coal demand in the Americas and Europe has remained strong.

Coals with higher sulfur have seen less demand in China, as buyers favored low-vols above all, and especially higher CSR and lower ash, said David Rossiter, executive director at trading group Visa Commodities. Higher coking coal and iron ore prices are squeezing steel margins, he told the Platts Singapore Coking Coal Conference.

Structural industry change impacting personnel and mining support services, along with regulations have hit US met coal output, as mines shuttered or cut shifts in the past two market troughs in 2020 and in 2015-2016.

Alpha sees strong US coke demand for coals, and coke shortages with plants taking time to resume at capacity, Horn added.

Australian low-volatile and mid-vol hard coking coals have displaced some US and Canadian coals in some Atlantic and Asian markets, while pressure on US seaborne market share is fading as prices rose and demand increases. As global demand continues to grow and with higher Australian FOB prices on a broader recovery, this is limiting pressure on forward US sales.

"We've lost some business where we've seen some Australian low-vol and mid-vol coming into our natural markets Europe and South America, but i think this phenomenon has been tempered a little bit, as Aussie pricing has moved up a little more," Horn said. "You're not quite the same as the US East Coast prices, but we're getting into that same range, so some of that issue is going to fade away in time."

Inquiries are already head for securing US coals for 2022-2023 volumes in North American and Atlantic contract markets.

"Some large European-based mills will be out for 2022 contract discussion starting April 2022 because they are concerned about the availability of quality coals from the US next year," said a US mining executive.

US mining companies will likely see stronger North American contract prices in 2022, compared with lower fixed prices agreed for 2021, Rossiter added.

Demand for US met coals in India has been "reasonably good," despite additional Australian coal imports this year, Horn said.

Imports were spurred on by lower Australian FOB prices in the first half of 2020, compared with US coals, which saw shipments grow to China.