Trading firms target China portside coking coal sales

13th Nov 2018

Trading firms are landing more seaborne coking coal cargoes at Chinese ports to give them exposure to higher prices driven by tighter domestic coal supplies in some regions.

The highest traded portside sale was 1,800 yuan/t ($260.62/t) for 20,000t of Saraji coal, sold at Shandong port on a free on truck basis. China’s portside coking coal markets are less liquid than its portside iron ore with fewer volumes, as coking coal imports are 10pc of its roughly 600mn t domestic supplies. Iron ore imports at more than 1bn t dwarf its domestic supplies.

An international coal trading firm booked two cargoes of US coking coal to be shipped to Jingtang port in Tangshan, Hebei province with no buyer yet secured.

“Indeed the cargoes will be expensive especially once the tariffs are worked in,” a trader with the firm said. “But we will see how it goes. We have the option to sell them off to ex-China markets if it comes to that.”

Firmer demand for tier-two mid-volatile coking coal in China is making US coking coal sales viable for trading firms to sell from the ports, even after factoring in the additional tariffs of nearly 30pc. US coking coal producers ceased exporting to China when China increased tariffs on US imports in August.

Sellers offering coking coal cargoes at the ports said demand has strengthened considerably over the past month, as tightening supplies of domestic coking coal forced Chinese steel producers and coke producers to seek out more imports. But not all buyers can participate in seaborne markets, while those that can have rejected current offer levels of above $220/t cfr China. Another advantage for buyers is portside purchases avoid customs and unloading delays at ports, particularly in south China.

Prices for coking coal in the largest coking coal producing province of Shanxi have increased by 20-30 yuan/t in the past month. An accident at one of the mines in Shandong province late last month compelled the local government to order 41 other mines to shut down temporarily for safety checks.

Although a portion of the mines have since reopened and are resuming production, output has been affected and forcing Shandong coke plants and steel producers to turn to Shanxi for their requirements. This has further squeezed supplies in a region typically beset with precautionary mine safety checks during the winter season.

Source: ARGUS MEDIA