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ArcelorMittal, steel tenders for coking coal may meet higher offers

London — Steel giant ArcelorMittal surprised coking coal markets recently with a major US domestic and international seaborne combined tender enquiry for fourth-quarter 2018 and 2019 volume, a taste of US forward demand as steel prices hit highs.

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Companies may hear demands from miners for higher prices than earlier contracted 2018 North American business, at prices heard in a range of $75/st to well over $100/st FOB Mine.

The tender targeted a range of coking coals with focus on low-vol hard coking coal, as well as semi-soft, PCI, semi-hard and US high-vol met coals, trading sources said.

The size of the volumes, and request for more tons, attracted attention, with the inquiry ahead of AK Steel and US Steel opening up their annual discussions, sources said.

ArcelorMittal declined to comment on its tender, stating company policy not to comment on ongoing tenders.

As bidders positioned for qualification and analyzed their sales portfolios for the coming months and 2019, more coke and steel companies have came out with long-term inquiries. Several US and Canadian buyers were sending RFPs to suppliers in July, sources said.

Domestic North American markets are scrambling for more met coal, to boost coke output and capture high steel margins following imposition of US steel import tariffs, which boosted steel prices.

At the same time, low-vol HCC, which can potentially improve yield at coke plants, are a scarcer grade, and globally spreads between low-vol and mid-vol premium coals have been widening as premium low-vols get higher pricing.

The market is now absorbing notices that the Pinnacle mine, a well-known low-vol from West Virginia selling into domestic and export markets, may cease production shortly on geological problems.

Lower Q2 production at Pinnacle, in results released mid-July by the Mine Safety and Health Administration, may also be contributing to the inquiries, with companies likely keen to secure alternatives.

In the high-vol market, price ideas for suppliers are said to be around export parity pricing, several miners and traders said.

Flexibility in moving US tons for exports, which have risen this year and outpaced domestic contract prices in 2018, may embolden offers. Steel mills may wait it out and highlight the benefit of staying in coke blends long-term amid cyclical steel markets.

US high-vol miner Ramaco Resources confirmed it has begun preliminary sales discussions with many "existing domestic customers," according to Executive Chairman Randall Atkins, in a quarterly statement this week.

Ramaco is expected to seek higher prices than for 2018, where domestic business is contracted at $79/st FOB Mine, based on its own production, and purchased coal at $100/st FOB Mine.

"We expect the company to direct about 50% of its sales to the domestic market and to receive pricing that is at least $10/st higher year on year," investment bank Seaport Global said in a note.

--Hector Forster, hector.forster@spglobal.com

--Edited by Jeremy Lovell, jeremy.lovell@spglobal.com