21/05/14 – ASIA MET COAL: Top-tier prices lower on persisting pessimism

Prime hard prices in the seaborne metallurgical coal market fell Tuesday, amid the continued reluctance of Chinese players to buy top quality coal from Australia, sources said.

Unease about China’s steel market and its broader economy, as well as abundant domestic supplies were cited as key factors limiting buy-side interest.Providing a floor to prices was the fact there were only a few offers for June-loading cargoes, traders said. One wondered whether this was tactical or if miners were genuinely short of cargoes.

Platts assessed premium low-vol hard coking coal down $1/mt to $125.50/mt CFR China, the steepest daily decline since March 21. The price equated to $112.25/mt FOB Australia netting back with Panamax freight and $116.75/mt FOB using a Capesize calculation.

Prices for second-tier material were unchanged at $113.25/mt CFR. This was $100/mt FOB Australia using a Panamax freight, or $104.50/mt FOB using a Capesize netback.

For first-tier coals, tight supply was not enough to provide a price boost with end-users slimming their bid indications and traders unwilling to go long given the market uncertainty.

Valuations for the most widely-appreciated material such as BMA Saraji and Anglo American German Creek were no higher than $126/mt CFR China. Meanwhile, Australian 67-69% premium mid- to low-vol HCC were deemed tradable below $120/mt CFR.

“Now is not the right time to trade. I see it further weakening into the second half of the year,” a trader in north China said, adding he was offering a Capesize July-loading premium mid-vol at $123/mt CFR China and would be willing to trade at $120-122/mt CFR- should firm bids arise.

In the PCI segment, an offer was heard made Monday at $100-101/mt FOB Australia for a 13% VM and 9.5-10.5% ash PCI. This was a Capesize, June laycan shipment. Indicative bids from end-users for second-tier PCI were mostly located below $100/mt CFR China, while offers were at least $3/mt higher.

Although the common refrain was that domestic coals were attractively priced, certain mills appeared resistant to alter their raw materials procurement strategy significantly in favour of these.

A steelmaker in northeast China said his technical team was unprepared to rely exclusively on domestic coal, typically of lower grade than imported material, led by premium HCC brands.

On the other hand, a procurement manager at an eastern mill said her buying strategy was now firmly in favour of Chinese coal, adding her coke oven resources were “flexible enough to switch from one to the other”.

Meanwhile, a Tangshan steelmaker said: “My only buying consideration is price, and seaborne is definitely still competitive”. Non-prime HCC prices were nearly on a par with domestic alternatives, she said.

In India, the Supreme Court-imposed closure of iron ore mines in the state of Odisha could affect metallurgical coal procurement in east India, traders said.

“The impact should be limited to east India, and could last maybe 3-4 months,” a local coke maker said, adding that a large number of the affected operations were captive mines belonging to Tata Steel and SAIL.

“It will definitely have some impact on coal procurement, as every mill [in the region] has started reducing their output already,” an Indian trader, said, adding the decline in demand could already be seen for July cargoes.

In the paper market, a few swaps trades were heard done Monday, including Q4 2014 at $120/mt and a $130/mt trade for Cal 2015, according to market sources and CME Group’s website.

Also heard done Tuesday morning was a March-April-May at $125/mt. Transactions were basis Platts Premium Low Vol and cleared by CME Group.

The September coking coal contract on the Dalian Commodity Exchange — most widely traded — slipped Yuan 1/mt ($0.16/mt) to the last-traded price of Yuan 814/mt. Meanwhile, the September coke contract price dropped Yuan 8/mt to Yuan 1,143/mt.


Source – Platts.com