Atlantic coking coal markets Thursday continued to experience weak spot demand from mills.
This was despite met coal output falls from Mozambique, which added to US third-quarter production declines from rates in Q2.
Several buyers this week were dismissive of spot needs, or activity in the market, relying on contracts for now. There is an expectation prices may fall with Chinese steel cuts aimed at cutting pollution taking place soon.
Comments reported at the National Congress meeting in Beijing around further property and construction controls in China may also add a bearish tone to steel. This comes after a boom this year, given the building grade rebar's star billing in the steel price and mill margin rally so far this year.
One source did not seem overly concerned with production falls at key US mines, suggesting Australian coal offers at lower prices may soon follow once China's spot met coal seaborne demand drops further.
S&P Global Platts assessed spot US low-vol coal unchanged Thursday at $164/mt FOB US East Coast.
Platts US high-vol A assessment for straight coal with low ash and sulfur, and CSR typically in the low 60s, remained at $147.50/mt FOB USEC.
The US high-vol B assessment, based on 34% VM unblended product, was unchanged at $127/mt FOB USEC.
Vale, which mines in Mozambique in a joint venture with Japan's Mitsui & Co., said Q3 metallurgical coal output hit 1.9 million mt, down 9.6% from the previous quarter. Volumes ramping up at a new phase of the project meant output was 74.4% higher than in Q3 2016.
Vale said the geological characteristics of the coal feed and optimization of the onsite processing plants led to a decrease in the share of met coal to thermal coal to a 58% rate; this ratio may rise to 60%-65%.
Vale sells mid-vol and low-vol grades of Moatize coking coal to Europe and northeast Asia.
The Australian Premium Low Vol net forward assessment Thursday was unchanged from Tuesday at $193.65/mt CFR Rotterdam. The assessment did not run Wednesday, due to a national holiday in Singapore, which determines the publishing schedule of the Asia-Pacific benchmark.
In terms of multi-destination freight costs for Atlantic and Pacific-based miners, the ability of lower freight rates as a trend to promote arbitrage may be under threat.
"A China-led improvement in demand-side fundamentals across a range of cargoes has firmed dry bulk carrier vessel earnings this year," SSY senior director for research Derek Langston said. "Market confidence for 2018-2019 is being restrained by an uncertain trade outlook, this year's re-acceleration in fleet supply growth and a resumption in newbuilding orders."
SSY says steel cuts in China may cut dry bulk rates for Q4 but higher rates thereafter may take hold in a volatile move.
"We anticipate a very gradual improvement in underlying dry bulk fleet utilization through to 2020, with bouts of spot rate volatility, ahead of potential market disruption by the IMO 2020 rules on low sulfur bunker oil," SSY said.
FUTURES
In the futures market, at the Asian close Thursday, the SGX reported clearing 114,000 mt of contracts from November through to 2019 period.
October SGX settlement prices closed unchanged at $182/mt FOB.
November's settlement price fell $1 to $174/mt FOB, with 12,000 mt cleared and trade at $176-$175/mt.
This expanded the backwardation between the months by $1 to $8/mt, using daily settlement prices. The Q4 period closed at $174.67/mt, down $1/mt.
Platts TSI Premium Hard Coking Coal reference price used for settlement on the SGX's coking coal futures fell steeply by $4.80/mt to $176.7/mt FOB Australia.
