London — North American coking coal buyers may be finding reasons to lower their price bids for 2020 contract volumes after a four-month decline in seaborne benchmark met coal prices and weak underlying steel prices.

Coal miners see potential for a range of price settlements, as some coals may find more interest on value-in-use qualities, limiting any price cuts on this year's contract levels.

US export spot prices for high-vol A, assessed by S&P Global Platts Wednesday at $152.50/mt FOB, are down from March's average high of $205/mt FOB.

Current spot export prices have fallen below domestic contract prices agreed for 2019 shipments, according to sources.

US steel prices have fallen this year, with Midwest HRC down about $200/st since December.

But indicative US mill margins remain healthier than other global markets.

US steel markets are supported by Section 232 tariffs on imports, a miner said.

Interest for buyers to contract key premium met coal grades such as mid-vols and high-vol A to maintain overall blast furnace productivity, and potential for lower US met coal output next year, are commonly cited by sellers.

Coal mining costs in the US are rising and output at higher-cost operations could fall away ahead of the planned start-ups of new mines in 2021 and 2022.

US domestic settlements for 2019 volumes saw a range of price increases from 2018, depending on timing and coal grades.

Mills came into the market early for 2019 volumes and took time to finalize settlements as seaborne prices rose in the second half of 2018.

For 2020, North American mills came into the markets in August after ArcelorMittal, the biggest regional integrated steel maker, launched inquiries earlier in July.

As of now, 2020 settlements are yet to be confirmed, and price ideas between buyers and miners for some met coal grades are likely as much as $20-$30/st apart.

Pig iron output was expected to fall at some mills later this year, based on individual steel producers' plans.

US output was relatively steady year on year in the first half of 2019, while Europe and Brazil have seen contractions which may worsen, according to World Steel Association data, market sources and public company plans.

STEEL SPREADS FALL

Spreads between spot Midwest US HRC steel prices and industry pricing for US iron ore pellets, contracted US coking coal and regional scrap costs adjusted for typical usage per ton of steel, fell 27% year on year to $470/st ($518/mt) in the first half of 2019, according to estimates by Platts.

In Europe, Northwest Europe HRC margins to raw materials fell 34% in the first half to an average Eur250/mt ($282/mt). German ex-Ruhr benchmark HRC spot prices have been weak this year on lower demand.

Higher iron ore costs on surging China import benchmark fines spot prices underpinning regional contracts squeezed profits at European and Brazilian mills reliant on seaborne supplies.

The Platts indicative steel margins do not account for inland logistics costs -- which can be substantial in the US -- power, natural gas or other blast furnace and steelmaking inputs such as ferroalloys, anodes and refractories, as well as iron ore and coke processing costs.

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

-- Edited by Daniel Lalor, newsdesk@spglobal.com