Monday, July 30, 2018

Prices of COKE expected to weaken further

China’s domestic coking coal market weakened in July amid production restrictions in the country’s steelmaking hub of Tangshan and four rounds of coke price cuts by a major mill.
Metal Bulletin’s weekly assessment of prices for domestic hard coking coal in Shanxi delivered to Tangshan stood at 1,360-1,700 yuan ($200-250) per tonne on Friday July 27, compared with 1,390-1,750 yuan per tonne on June 29.

The assessment is down 30-50 yuan per tonne due to lower coke prices and weaker demand following restrictions imposed by local authorities in Tangshan from July 10 until August 31 to cut emissions, market sources said.

Cheaper coke
“Coke prices have been falling since the first working day of July and the downward momentum rubbed off on coking coal prices,” a Tangshan-based coke plant source said.

East China’s Rizhao Iron & Steel, a major coke buyer, lowered its purchase price for the steelmaking raw material four times in July. Following the reductions totaling 350 yuan per tonne, the mill is now paying 2,000 yuan per tonne for materials with 57% coke strength after reaction delivered to its facility.

Coke prices have stabilized since Rizhao Steel’s last reduction on July 19, and a segment of the market even expects them to rebound, but the bullish sentiment does not appear to be offering any support to the coking coal market.

“Though coke prices have stopped falling, the large amounts of coking coal stockpiled at various mines in Shanxi are forcing miners to slash prices for quicker sales,” a domestic trader based in Beijing said.

High inventories
Coke output remains limited in China, partially due to low profit margins forcing producers to lower their coking activity on their own accord. But the main factor limiting coke production in the country is the government’s continual efforts to reduce pollution.

A Tangshan coke producer is putting priority on drawing down its coking coal inventories instead of procuring more raw materials due to limited space in its stockyard, a source said. This is the case for other coke producers in the region as well, he said.

Subdued demand
Despite a recovery in domestic steel prices, market participants are still not seeing any support for the coking coal market.

“It is not just about high steel margins. Market fundamentals determine that if [the] supply [of coking coal] were to exceed demand, then prices come under pressure,” the Beijing-based trader said.

A mill source in Hebei province concurred. The mill’s coking rate has been cut to 2.5 million tonnes per year from 5 million tpy, he pointed out, and as a result, it has stopped procuring coking coal in the spot market.

“Our new project that was slated to begin operations in August has also been postponed indefinitely because of the Tangshan production cuts,” he added.

As such, sentiment in the domestic coking coal market remains bearish, and market participants are expecting prices for the steelmaking raw material to weaken further.

Tuesday, July 17, 2018

Trading picks up in second-tier market

The second-tier segment in the seaborne coking coal spot market saw a flurry of trades involving its top brand after more than two months of inactivity.

“[Lower rail capacity] is still a rough situation. [Rail services are] still performing below contractual performance. [Rail freight operator] Aurizon will be shifting its maintenance back to the Blackwater line [from the Goonyella line currently] after mid-September,” a seller source in Australia said.

Mining major Anglo-American’s underlying earnings before interest, taxes, depreciation and amortization (Ebitda) for its metallurgical coal division in the six months to June 30 totaled 1.16 billion, up 23% from a year earlier.

Canadian miner Teck Resources said it sold 6.6 million tonnes of steelmaking coal in the April-June quarter, down 7% on the year. The miner said in its latest quarterly report that the lower sales volume was a result of low port inventories and reduced rail capacity due to “strike preparation at [Canadian Pacific Railway’s] operations.”

It reported an average realized price of $183 per tonne for its coal, which compares with $167 per tonne in the same period of last year.

The benchmark September coke contract closed at 2,136.50 yuan per tonne, down 5 yuan per tonne for the day.

The cfr China hard coking coal index shed $4.99 per tonne to $165.02 per tonne while the fob Australia index lost $6.44 per tonne to $155 per tonne.

Four cargoes of the same brand with a laycan stretching from August 15 to September 10 have changed hands. Three of these were sold at $165 per tonne cfr China while one was traded at $155 per tonne fob Australia, various sources told Metal Bulletin on Thursday July 26.

Due to rail capacity issues on the Blackwater line in Australia’s coal production hub of Queensland, this brand had not been traded in the spot market since the end of May. The last price it fetched was $183.50 per tonne cfr China, according to Metal Bulletin’s records.

Outside of China, a September-laycan cargo of premium mid-vol hard coking coal was offered at $176 per tonne fob Australia. But the offer failed to generate any interest, an Indian mill source said.

Metal Bulletin also received reports of a cargo of premium mid-vol materials changing hands at $171 per tonne fob Australia during the day.

The miner attributed the gains to increased met coal production and a higher average realized price, according to its latest half-year report released on Thursday.

The Dalian Commodity Exchange’s most-traded September coking coal contract closed at 1,196 yuan ($176.50) per tonne on Thursday, down 1 yuan per tonne from a day earlier.
Metal Bulletin’s cfr China Premium Hard Coking Coal Index fell $1.44 per tonne to $179.89 per tonne while its fob Australia equivalent is down $0.46 per tonne, at $172.53 per tonne. 

Monday, July 16, 2018

Vale's metallurgical coal output falls 24% in Q2

Vale’s production of metallurgical coal decreased by 23.90% year-on-year in the second quarter of 2018 because of adverse conditions at the mine, the company said on Monday July 16.
The miner produced 1.56 million tonnes of metallurgical coal in the April-June period, compared with 2.05 million tonnes in the corresponding months of 2017.

Vale has faced 
severe weather conditions since the first quarter of this year at its Moatize mine in Mozambique. This prevented a recovery in output and was only overcome in the second quarter, the company said.

“The lower production compared with the second quarter of 2017 was mainly due to the difference in the coal seams fed to the plants,” Vale said.

Vale took delivery of new trucks and excavators during the second quarter, and plans to increase production in the second half of this year.

Metallurgical coal sales amounted to 1.41 million tonnes in the April-June period, down by 31.60% from 2.06 million tonnes a year before.

Metal Bulletin’s Premium Hard Coking Coal index averaged $195.91 per tonne cfr Jingtang in the second quarter of 2018, compared with $173.48 per tonne cfr Jingtang a year earlier. The index was $185.08 per tonne cfr on July 16.