Prices for Australian coking coal exports are forecast to track lower in the coming weeks, as China’s environment protection measures on carbon emissions are extended and the coking coal spot market remains oversupplied.
“It seems that BHP has only just started selling their May-loading cargoes, and we expect much more to follow,” a trader said on the sidelines of the Coaltrans China conference in Beijing. “Traders who bought as recently as last week are already regretting not holding off for a while longer.”
Three cargoes of premium hard low-volatile and mid-volatile coking coal cargoes were sold to Chinese trading firms last week, just before the Chinese market went on holiday for the Qingming tomb sweeping festival.
The onset of Cyclone Iris last week sent prices creeping up momentarily as north Queensland coal ports closed and one declared force majeure. But the increase was short-lived and prices began falling once the ports of Hay Point and Abbot Point resumed operations.
The Argus assessment for premium hard coking coal fell to $193/t fob Australia yesterday, after briefly swinging higher to $196/t from $192.50/t last week.
“Seaborne prices at the current level are actually really very much lower than domestic coking coal prices,” an Australian producer said. “So seaborne coal should be attractive to the Chinese, but they are just waiting for prices to bottom out before making a move.”
The sudden entry of more Chinese trading firms into the international market that have been present in the seaborne coking coal for a several months further discouraged buyers from stepping out, as it only further fuelled their perception that the market is extremely well supplied.
The Chinese government’s environmental protection measures on steel production are also expected to continue.
“If we want to look further into the future, we can expect that Chinese steel mills should move further up the value chain and start producing higher quality steel,” a Chinese purchasing manager said. “This means that the demand for high-quality Australian coking coal should remain strong, but the pool of buyers should shrink gradually.”