Australian coking coal producers look to Europe as Chinese market cools

Poor sentiment in the Chinese market following two corporate defaults in the country has seen Australian coking coal producers look elsewhere for buyers.

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News of a steel industry default in the first week of March saw iron ore and coking coal prices drop sharply.

Miners are unwilling to cut prices any further into China and buyers are waiting for the market to stabilise, sources said.

“Things are worse than people expected them to be in China,” a European trader said. “The Chinese aren’t buying, so the Australians are now offering spot cargoes to everyone else at prices that other producers can’t or don’t want to match.”

Australian premium hard coking coal brands, including Peak Downs, were reported to have been offered at $124 per tonne fob over a week ago, but the trader said that he expects prices to fall to $120 per tonne fob. 

A Turkish mill was reported to have bought two cargoes of Australian mid-vol coal in the second week of March, as well as a cargo of low-vol Australian pulverized coal injection material (PCI) at around $110 per tonne delivered.

A trader in India told Steel First he had been prepared to buy a cargo last week, but decided to delay his purchase in the expectation that the market would post further losses.

“We will only buy if there is a dire need, [but] I don’t think prices have reached the bottom yet,” a second Indian trader said.

Sources said that they did not expect Australian miners to exercise production discipline at these price levels, adding that hard coking coal values would have to slip by at least another $10 before that happened.

“The Australians are still making money even at these prices,” the second trader added.

Australian coking coal sales are also being supported by the resilient Australian dollar, sources said. The currency reached its highest level yet this year on Wednesday March 19, with A$1 worth $0.9138.

“The Australian producers are now taking spot tonnes to the rest of the market and are becoming increasingly aggressive,” a second European trader said.

US coking coal producers, who until earlier this month had managed to maintain a grip on the European market, are now being undercut by Australian producers offering high-quality coal at low prices.

“The US producers would rather leave their coal in the ground at these prices,” the first European trader said.

Malaysian hard coking coal was reported to have been offered at $115 per tonne over a week ago, and a trader source said he expected to be able to buy the same material at $100 per tonne today.