25-01-2018

Coking coal prices supported by mine, logistics issues: Seaport Global

Coking coal mine and logistics disruptions may be a strong source of price support this year for the commodity, according to US investment bank Seaport Global.

Seaport raised its benchmark coking coal contract pricing forecast for 2018 to $170/mt FOB, from an earlier $150/mt FOB. Seaport expects first-quarter pricing of $220-$230/mt FOB. This is based on a spot price index-based calculation, which use premium HCC FOB Australia prices published by S&P Global Platts, according to market sources.

A run of spot prices assessed in December, part of a three-month period used to price Q1 contracts, has provided a “strong start to the year,” analysts led by Mark Levin said in a note. December 2017 averaged at $242/mt, the note said.

“We are more than halfway through the Q1 price assessment period, and met coal prices have averaged $246/mt,” Seaport said.

“While we expect met coal prices to fall over the course of the year, simple math tells us it will be challenging for benchmark quality prices to average much less than $170/mt in 2018 given the strong start to the year and some potentially notable mine production issues,” it added.

Seaport said Canadian miner Teck’s coking coal processing plant disruption announcement last week at the Elkview mine — which is operating but at reduced capacity — is the most recent of mining issues. Along with reduced output and problems highlighted in Australia at BHP Billiton-operated mines, lower output and unexpected disruption may support prices going forward.

Nonetheless, the bank expects higher Mongolia output and exports of the coal to China, and reduced vessel queues in Australia, to aid a price decline later this year.

China’s participation in the seaborne market is crucial to spot pricing and industry data cited by Seaport suggests the country needs to restock coking coal to some degree.

Seaport expects China may be back importing material in a month or so. China has been largely out of the market for prime coals after domestic coal prices had a long run of being lower than imports. This has switched back in the middle of this month to favor imports, according to Platts price data.

“From our contacts, we believe the Chinese will remain out of the met market for at least the next month, banking on prices drifting lower until they return from holiday (~February 20s),” Seaport added.

Source: Platts

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