Thursday, March 22, 2018

Rio Tinto exits coking coal, seeks new economy metal ventures

Accordingly to Platts - Miner Rio Tinto is selling its last remaining Australian coking coal asset, Kestrel, shifting growth into investments in metals and minerals for batteries and new economy applications.

The company is close to a complete withdrawal from metallurgical coal, after divesting Hail Creek and other coal assets in Queensland and New South Wales over the past year.

Rio Tinto remains the second-largest iron ore miner in the world, as well as leading iron ore supplier to China. Maintaining a foothold in the old emerging economy model of China-led steel infrastructure and real estate demand comes with sky-high margins. It had 68% EBITDA for its Pilbara iron ore business last year.

Coking coal mining is part of the group's energy and minerals segment, which reported a 36% EBITDA margin. A series of spot pricing peaks for the commodity in the past two years had led to earnings volatility.

n Perth this week, the contrast with new industry focus on industrial metals was clear.

Perth, capital of Western Australia and head of Rio Tinto's regional iron ore operations, held its 21st annual global iron ore and steel forecast conference, while Rio Tinto chose to deliver a presentation at the inaugural Lithium & Battery Metals Conference organized at the same hotel.

Rio Tinto is incubating future mining ideas despite strong prevailing demand for steel raw materials, copper and aluminum.

Chinese environmental policy measures are increasing demand for higher grade iron ore and reducing new aluminium capacity, while global growth is driving demand for existing group commodities, said Andrew Latham, head of Rio Tinto Ventures at the Perth event.

"At the same time, we see the potential for a broader suite of metals to play an increasingly important role as new and disruptive technologies change the way we live," he said in prepared remarks for the event.


VENTURE INVESTMENTS


The Ventures unit will review projects past feasibility study considering a variety of investment entry possibilities, and leverage the group's capital, operating expertise, exploration and marketing and logistics networks.

Rio Tinto cites tin, lithium, cobalt, silver, nickel as metals with the biggest impact from new technology, using research from Massachusetts Institute of Technology.

The company plans to finalize this year a study into the Jadar project in Serbia, which has deposits of lithium-sodium-borosilicate mineral. Rio Tinto said pre-feasibility is already well underway, started in 2015.

The site near Loznica has a potential 2.5 million mt of lithium oxide and 21 million mt of borates, with a long mine life potential from 136 million mt in total resources, it said.

An on-site plant around Jadar's underground mine complex producing battery grade lithium carbonate and boric acid is planned to start up in the early 2020s.

"The tripling of lithium prices over three years has drawn significant investor interest as major players jostle for dominance to supply multi-billion dollar supply deals fundamental to the electric vehicle battery revolution," UK investment bank SP Angel said in a note Wednesday.

"China is expected to top the list of mergers and acquisitions as companies seek control of the market to match government targets of 7 million vehicles by 2025."

Serbia will jostle with development tapping larger lithium resources in Chile, while being closer to demand in Europe. The "Jadarite" resources have potential to provide both lithium carbonate and by-product boric acid, Rio Tinto said.

With stronger coking coal prices since 2016, the Australian market saw divestments at Glencore, Wesfarmers and Anglo American.

Rio Tinto Thursday announced it agreed the sale of the Winchester undeveloped coking and thermal coal project in the north of Queensland's Bowen Basin to Whitehaven Coal.

On Tuesday, the company's sale of the Hail Creek low-vol hard coking coal mine to Glencore, along with the Valeria project, was announced. Rio Tinto sold Coal & Allied, a semi-soft and thermal coal producer in New South Wales, to Yancoal Australia in 2017.

Monday, March 19, 2018

Nippon Steel settles 1Q PCI, semi-soft coking contracts

Accordingly to Argus media Website - Japan's Nippon Steel and Sumitomo Metal (NSSMC) has agreed a first-quarter 2018 pulverised coal injection (PCI) contract price of $159/t fob Australia with Australia-listed producer Realm Resources. The price is for Foxleigh PCI.
NSSMC has also agreed a first-quarter semi-soft contract price of $150/t fob Australia with Australian private-sector mining firm Bloomfield for Rix's Creek semi-soft coking coal. But it is unclear if other major semi-soft producers such as Switzerland-based Glencore will follow that settlement.
NSSMC used a three-month average of premium hard coking coal prices indexes from the December-February period as guidance in its first-quarter contract negotiations. Coking coal prices remained above the $200/t level over that period as a result of supply constraints and strong demand, sending first-quarter 2018 prices above fourth-quarter settlements at $135/t for PCI and $126/t for semi-soft coking coal.
The Argus premium hard low-volatile coking coal assessment averaged $236.17/t fob Australia in the December-February period.
But the first-quarter settlement prices agreed by NSSMC are also above current spot prices, which are assessed by Argus at $151.55/t fob Australia for low-volatile PCI and $143.50/t fob Australia for mid-volatile semi-soft coking coal.
"We do not see any reasonable logic to settle for a price at $150 fob. It is true that the index average is about $240 fob, but many people think that the market is in fact easing," another Japanese steelmaker said. "But at this moment there are no big changes in sight for the way that the quarterly prices are being negotiated."
Glencore tabled an offer for first-quarter semi-soft contracts to steelmakers in Asia and Europe at $156/t fob Australia. It may have been able to make a deal at that price with Taiwan's China Steel and potentially other mills, market participants close to the negotiations said.
Rival Japanese steel producer JFE Steel does not use an index average in its bilateral quarterly PCI and semi-soft contract negotiations. It is expected to continue talks for second-quarter contracts this week.

Thursday, March 15, 2018

COKING COAL DAILY: Flurry of trades prop up prices for premium products

A flurry of transactions took place in the seaborne coking coal spot market on Thursday March 15, which gave some support to prices for premium products.

A cargo of premium mid-vol hard coking coal with an early-April laycan was heard to have been sold against index with a discount of under 1% to an end-user while another shipment of the same brand was traded at $215 per tonne fob Australia. 

A premium mid-vol product changed hands at $220.50 per tonne cfr China, market sources said. A cargo of premium low-vol materials had traded at the same price a day earlier.
“Chinese buyers will snap up premium-category cargoes, especially low-vol and low-sulfur materials at prices of $210-220 per tonne cfr,” one market participant said. 


“The supply of such materials is tight in China and while previously the offer prices were forbiddingly high, recently transacted levels of $220-221 per tonne cfr China for premium low-vol materials suggest there is some pent-up demand at those price levels,” he added.

 
A trader source said that the downward movement on an fob Australia basis was along expected lines, attributing the reasons to diminishing fears over weather-related disruptions and the lack of any Chinese demand. 


“The correction [in seaborne prices] will largely be restricted to the premium materials since second-tier prices had not experienced a massive jump previously,” he added. 
Meanwhile, Aurizon on Tuesday confirmed that the potential loss of throughput arising from revised operating practices could be up to 20 million tonnes on an annualized basis.


The estimated split across its Central Queensland Coal Network’s four rail corridors is as follows: Goonyella, up to 10 million tonnes per annum; Blackwater, up to 8 million tonnes per annum; Moura, up to 1.5 million tonnes per annum; and Newlands, up to 0.3 million tonnes per annum. 


A few end-user sources in China and Southeast Asia have downplayed any immediate supply concerns in relation to this, saying their coal deliveries had not experienced any delays recently.


The Dalian Commodity Exchange’s most-traded May coking coal futures contract closed at 1,285 yuan ($203.40) per tonne on Thursday, down 9.50 yuan per tonne from Wednesday’s closing price. 


The benchmark May coke contract closed at 1,999 yuan per tonne, down 22 yuan per tonne for the day. 


Metal Bulletin’s cfr China Premium Hard Coking Coal Index stood at $220.07 per tonne on Thursday, up $5.97 per tonne from Wednesday, while the fob Australia premium hard coking coal index gained $1.03 per tonne to $215.14 per tonne. 


The cfr China hard coking coal index fell $1.06 per tonne to $206.97 per tonne while the fob Australia index shed $2.02 per tonne to $200.60 per tonne.

Wednesday, March 14, 2018

COKING COAL DAILY: Ample supply weighs on seaborne market

The seaborne coking coal market continued to be under pressure due to the amply supply of cargoes.

Two more cargoes of premium low-vol materials transacted at around $220-221 per tonne cfr China, sources said on Wednesday March 14. 

Offer price for a premium brand was also heard lowered to around, $215-216 per tonne cfr China, which is around $10-11 per tonne lower than the level it traded earlier this week. 
Sentiment was overall bearish in China despite a rebound in futures and the steel market following the saturation of cargoes in the market. Metal Bulletin’s cfr China Premium Hard Coking Coal Index stood at $214.10 per tonne on Wednesday, down $4.78 per tonne from Tuesday, while the fob Australia Premium Hard Coking Coal Index fell $1.56 per tonne to $214.11 per tonne. 


The Metal Bulletin cfr China Hard Coking Coal Index fell by $1.46 per tonne to $208.03 per tonne while the fob Australia Hard Coking Coal Index fell $2.30 per tonne to $202.62 per tonne. 


“The tumble in the seaborne [coking coal] market is not surprising since the prices were abnormally high on the back of speculation,” a mill source said. 
The Dalian Commodity Exchange’s most-traded May coking coal futures contract closed at 1,294.50 yuan ($204.60) per tonne on Wednesday, up 43 yuan per tonne from Tuesday’s closing price. 


The benchmark May coke contract closed at 2,021 yuan per tonne, up 33 yuan per tonne for the day.

Monday, March 12, 2018

COKING COAL DAILY: Premium products come under pressure

The gap between prices for premium hard coking coal and second-tier materials has narrowed by $20 per tonne over the past week, with the top-tier segment experiencing further weakness on Monday March 12.

A bid was made for cargo of premium hard coking coal at $214 per tonne fob Australia while offers for such materials have fallen to about $225 per tonne fob Australia, market participants told Metal Bulletin. 

A trader source said that the lack of transactions on an fob Australia basis recently was underlining buyers’ reluctance to pay anything above $230 per tonne, and that “this correction was bound to happen.” 


Another trader source pointed out that while there was some demand among buyers in India, the expectation of lower prices had made them take a wait-and-see approach. 
Meanwhile, a Chinese buyer source attributed his bearish outlook for seaborne coking coal prices to the weakness in China’s steel market and an easing of a supply tightness for domestic coking coal. 


“The offers might be at the previously traded levels of around $235 per tonne cfr China for premium materials and at around $210 per tonne for second-tier materials, but buyers will no longer agree to such prices,” he said. 


Metal Bulletin’s cfr China Premium Hard Coking Coal Index stood at $232.35 per tonne on Monday, up $0.83 per tonne from last Friday, while the fob Australia index fell $10.56 per tonne to $219.74 per tonne. 


The hard coking coal indices were flat, at $215.12 per tonne cfr China and $206.43 per tonne fob Australia.


The Dalian Commodity Exchange’s most-traded May coking coal futures contract closed at 1,266 yuan ($200) per tonne, down 34.50 yuan per tonne from last Friday’s closing price. 
The benchmark May coke contract closed at 2,002 yuan per tonne, down 33 yuan per tonne for the day.

Wednesday, March 7, 2018

COKING COAL QUARTERLY: Japanese mills set to pay more amid supply concerns

Japanese buyers of seaborne coking coal will have to pay a higher price for their January-March volumes in comparison with the preceding quarter, with the emergence of fresh supply concerns last month leading to an uncertain outlook for prices in the coming quarter.

Metal Bulletin’s fob Australia Premium Hard Coking Coal Index averaged $236.07 per tonne over the December-February period, up 23% compared with $191.93 per tonne during the September-November stretch

Japanese buyers are set to price their March-quarter volumes using the average of a basket of premium hard coking coal indices during the December-February period. 
The higher traded levels over the last three months have mainly been a result of tight supply, which supported prices in February despite the absence of China, the largest buyer in the spot market, for a large part of the month. 


Metal Bulletin’s fob Australia premium hard coking coal index stood at $235.84 per tonne on Tuesday March 6, compared with $216.94 per tonne on February 1. 


Aurizon throughput While much of the supply concerns over the past three months stemmed from long vessel queues at Australia's Dalrymple Bay Coal Terminal, they have now moved further upstream.

The concerns were stoked last month when Australian coal rail freight operator Aurizon announced a potential reduction in its annual throughput
Coking coal miners in Australia use the rail network maintained by Aurizon to transport their output from mines to ports. From there, their coking coal is shipped to various parts of the world. 


“On January 30, Aurizon advised the coal supply chain that it would progressively introduce changes to align its operating practices and business decisions with the requirements of the Queensland Competition Authority’s Draft Decision,” it said on February 12. 


The operator said the net impact of initial changes could reduce system throughput by approximately 20 million tonnes annually, adding that “further changes are likely to be implemented, with potential to further reduce volumes.” 


It now expects to transport 210-220 million tonnes of coal via its rail network during its financial year ending June 30, which is lower compared with its previous guidance of 215-225 million tonnes. 


“This latest announcement shows Aurizon is willing to use its power as the monopoly operator of the network and further highlights why the regulatory process needs to be followed to maintain a level playing field,” Ian Macfarlane, the chief executive of the Queensland Resources Council (QRC), said in a statement following Aurizon’s announcement. 


“The QRC is calling on Aurizon to step back from its decision and is seeking reassurances from them to instead engage constructively with the regulator to review any concerns with maintenance,” he added. 


The potential loss of throughput was dubbed by a supplier source as having an impact “similar to a cyclone event.” 


In April last year, disruptions to rail services connecting mines to the ports in Queensland, which cut supply by roughly 10 million tonnes, resulted in seaborne coking coal prices surging to $300 per tonne fob Australia. 


With memories of those disruptions still fresh, market participants are keeping a close eye on how the potential reduction in Aurizon’s throughput would affect seaborne supply in the coming months. 


“Rail allocation contracts are agreed for multiple years between miners and the freight operator and the allocation used at any given point could vary,” a seller source said. 
“The use depends on a number of factors, including performance of the mines and [the fact that] not everybody uses all the railings allocated to them all the time,” he added. 


Another seller said that there was likely to be some impact if Aurizon reduced its throughput capacity, though he had doubts about the reduction amounting to 20 million tonnes per year. 

“The move will affect Aurizon’s earnings as well so we will have to see how it is implemented,” he added. 


The source warned, however, that any reduction in Aurizon’s throughput would result in a longer recovery time should a weather event take place. 


A third seller source said that it had “a number of train cancellations last month,” but did not quantify their impact on its coking coal exports volumes. 


A steel mill source in India said that miners had issued warnings of “reduced rail allocations following the decision from Aurizon.” 


But the source did say how many tonnes of supply would be affected as a result, though he added that “20 million tonnes per year of reduction in throughput seems high.” 
Despite these uncertainties, buyer sources have yet to come up with firm plans to increase the share of alternative supply. 


“With seaborne prices rising above $200 per tonne fob Australia since last year, supply has emerged from places like the United States. Even Mozambique has been ramping up [production] so the conversations on alternative supply began much earlier than when the Aurizon issue came to the fore,” another Indian buyer source said. 
Vale, which produces metallurgical coal in Mozambique, reported an output of 6.95 million tonnes of the steelmaking raw material last year, compared with 3.48 million tonnes in 2016. 


US coking coal exports rose to over 40 million tonnes last year - the first year-on-year rise in export volumes over the past five years. 


Another source in India said that the absence of concrete plans to increase the share of alternative supply stemmed from the uncertainty about whether Aurizon would follow through with its decision to cut throughput. 


“Besides, Australia boasts of having the best-quality coking coal resources and its geographical proximity to Asian markets makes it a difficult supplier to replace easily,” he added. 


Chinese demand 


Market participants in China have so far downplayed the potential impact of Aurizon announcement on the seaborne coking coal market. They insist that their decision to import seaborne coking coal will continue to be a function of the price gap between domestic and imported materials. 


Domestic prices in China eased slightly last week for lower-ranked materials, though market participants have indicated that the supply of products with low-sulfur and low-ash content was tight. 


Metal Bulletin’s assessment of domestic hard coking coal in China delivered to Tangshan stood at 1,500-1,950 yuan ($237-308) per tonne on March 2, down 70 yuan per tonne on the lower end of the range compared with a week earlier. 
This is the first downward movement witnessed in China’s domestic market this year. 
“Prices for premium materials in China remain supported due to tight supply, which is expected to last for at least two more weeks after the ‘twin sessions,’” a coke plant source said. 


The annual meetings of the China’s 13th National People’s Congress (NPC) and its National Committee of the Chinese People’s Political Consultative Conference (CPPCC) commenced on March 5 in Beijing. 


Metal Bulletin’s cfr China Premium Hard Coking Coal Index stood at $234.88 per tonne on March 6, compared with $211.31 per tonne on February 1. 


“We are bullish about raw materials prices for the month of March on the back of higher steel prices. Mills in Hebei province had scheduled maintenance [in February] but it looks like they will postpone it in the wake of high steel prices. 


“They are prioritizing output as far as I am concerned,” a trader source in China said. 
Metal Bulletin’s assessment of domestic prices for rebar in east China was 3,920-4,000 yuan per tonne ex-warehouse on March 6, compared with 3,830-3,890 yuan per tonne on February 1.