Rising coking coal prices after a spate of heavy rain disruption in Australia, and a slow steel industry demand recovery in Europe, is reducing spot met coal demand and interest for restocking, according to Atlantic market sources.
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High costs for restocking at prevailing spot prices and tight finances after a spell of weaker steel prices and margins along with capital for lower emissions steelmaking investments, are leading some groups to cut buying aspirations.
The Platts Premium Low Vol index hit $332/mt FOB Queensland on Jan. 27, the highest level since last June and recovering from $188/mt FOB on Aug. 2.
No Atlantic buyers had any fresh spot activity to report, and in relation specifically to any disruption from wet weather in Australia. One mill stated it was not looking to be the best timing to buy a spot cargo.
Earlier in January, US high-vol A coal with less than 1% sulfur was heard traded, along with some other grades, for prompt loading. Pricing was reported at small discounts to Platts high-vol A index, and broadly in line with contract terms, with no further details on quality.
A source said coking coal demand was stable, and there were available options in the US market ahead of April and May laycans if needed, but receiving coals was an issue in northwest Europe, thwarting spot trade.
Spot availability was discussed for BHP's Goonyella brand loading end-February, and March-loading cargoes, including the intention of JSW Steel Global Trade to tender on Feb. 1 for 75,000 mt of the 'Goonyella C' brand, loading March 15-24.
Merchant met coke prices are low relative to coking coal prices, while switching to use more coke instead of buying additional met coal was not as simple to execute, a buyer said. Logistics, shipping, quality and operational factors may still incentivize working with captive coke, over purchased coke.
In Europe, blast furnace restarts at SSAB's Raahe in Finland and at US Steel Kosice, with EU industry considerations to bring on further capacity next month may be stoking restocking interest for met coals and met coke and supports additional volume inquiries for iron ore pellets heard through January.
However, even with the slight uptick in daily EU pig iron production in November from October, declines from 2021 remained steep enough to require a fast rebound in iron and steel capacity utilization to really improve steel raw materials consumption rates.
The World Steel Association has yet to report December steel and iron data.
There may be less need for additional coking coal volumes without a move towards 2021 industry pig iron rates. Possibly, some mills will look at ways to manage contract performance with shipments and operations in the next few months as some cargoes are delayed later into the first quarter.
The seasonal supply crunch may have a knock on effect for the shipping program across premium low-vol, mid-vols, second tier met coals and pulverized coal injection materials, as buyers gage needs ahead of the seasonally weaker Q3 period.
Disruptions from Queensland led at least two companies to declare delays to shipments, and major terminal operator DBCT to notify suppliers it had to stop receiving coals mid-January to manage stocks with a postponement in loadings with delays to maintenance on a ship loader.
"The production loss may be around 7-10 days." a source said. Some producers have indicated a limited impact from the rain.
High coal stocks in Europe's Rotterdam area continued to limit space for discharge and constrain shipping operations and were holding up an on-the-water cargo of coking coals from Australia, a source said.
US East Coast met coals were seeing weaker spot demand and activity, and current logistics constraints may contribute to healthier arrivals in March and April, just at the start of new contractual terms.
A European steel mill source saw ongoing pressure on working capital, even with stronger steel margins, as groups prepare to finance capital intensive investments related to new low-emissions steel assets and processes.
Russian coal supplier-offered trade finance terms are no longer available, tying up buyers' working capital for longer. This is prompting some buyers to depend more on finance on coal and coke purchases from commodity traders, and purchases on delivered pricing terms rather than on FOB deals.
Stocks may be tight, even as purchasers avoid risks for running out, while testing raw materials combinations with gas, emissions, iron ore and coal and coke prices for options to optimize stock levels.
US miners said they are generally well contracted ahead, with some supply coming onstream from several new mines. This may limit spot deals with less coal being earmarked for China, as the country prefers to use Mongolia and Russian coals and prizes imports of low-vol and high CSR coals with low impurities.