TSI monthly coking coal review - July 2013
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© The Steel Index 2013 ¦ page 1 Summary Australian benchmark Premium Hard Coking Coal prices for July-September quarter were settled at $145/tonne FOB Australia, down by $80/tonne, or -36%, for the same period of 2012 Negotiated monthly contract premium hard coking coal prices for July stood at $145/tonne FOB East Coast Australia, down by US$2/t (-1.4%) month-on-month If TSI monthly-lagged prices were applied to contracts, they would have been priced at FOB East Cost Australia US$136/t for July (the average of June’s daily prices) July’s month-on-month spot averages fell -2.2% for PHCC, and -5.1% for Hard Coking Coal. Though monthly prices are down again, spot prices reversed direction mid-month Between four and five million tonnes of coal stocked at Chinese ports, sufficient for 10-14 days worth of steel production Buy-side demand remained weak in July, due to the traditional lull in the construction sector ► Contact TSI: Tim Hard Tel: +65 6530 6413 Jarek Mlodziejewski Tel: +44 20 7176 7618 Serena Seng Tel: +65 6216 1059 [email protected] ► Prices: Premium Hard Coking Coal Premium hard coking coal prices fell from $135/tonne FOB EC Australia to $131.3/tonne FOB EC Australia in the first week of July on weak demand. Prices remained mostly flat around $131/tonne in the second week as buyers continued to consume stockpiles, run lean inventories and use domestic suppliers where possible. Towards the end of July, Australian export prices firmed to $132.8/ tonne (FOB) as regional steel mills, especially those in China, emerged to replenish stocks. On a month-on-month comparison, July‟s premium hard coking coal price fell by -2.6%, to US$132.69/tonne (from $136.29/tonne) FOB EC Australia in June. ► ► ► ► ► Prices: Hard Coking Coal Despite an initial fall, hard coking coal prices were mostly stable in July on the back of tighter supply, as one Australian hard cok- ing coal mine was undergoing long-wall maintenance. July was a „U‟ shaped month in pricing terms, with prices starting at US$116.8/t, falling to US$115.7/t mid-month, before increased demand supported a climb to US$117.9/t. On a month-on-month comparison, July prices stood at $116.5/ tonne FOB EC Australia, down by -5.1% from $122.6/tonne FOB EC Australia in June. The highest and lowest price spread between premium hard coking coal and hard coking coal prices in July were 18.7% and 15.1% respectively. ► ► ► ► July 2013 ► TSI Coking Coal Spot Reference Prices, FOB Port East Coast Australia (US$/metric tonne) * Calendar Quarters ► ► Reference Price q-o-q q-o-q Benchmark Premium Coking Coal 172 4.20% 145 -15.70% Negotiated Quarterly Contract Proces FOB Port East Coast Australia (US$/metric tonne) Q2*Benchmark Q3* Benchmark m-o-m m-o-m Benchmark Premium Coking Coal 147 -5.16% 145 -1.36% June Benchmark July Benchmark Negotiated Monthly Contract Proces FOB Port East Coast Australia (US$/metric tonne) $100 $110 $120 $130 $140 $150 $160 $170 $180 18/01/2013 18/02/2013 18/03/2013 18/04/2013 18/05/2013 18/06/2013 18/07/2013 TSI Premium Coking Coal TSI Hard Coking Coal Source: TSI Reference Price m-o-m m-o-m m-o-m q-o-q TSI Premium Hard Coking Coal 144.60 -3.12% 136.29 -5.75% 132.69 -2.64% 132.69 -7.20% TSI Hard Coking Coal 128.51 -3.13% 122.63 -4.58% 116.50 -5.00% 116.50 -8.56% TSI Coking Coal Spot Reference Prices FOB Port East Coast Australia (US$/metric tonne) June July May Q3-To Date Averages*
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Transcript of TSI monthly coking coal review - July 2013
© The Steel Index 2013 ¦ page 1
Summary Australian benchmark Premium Hard Coking Coal prices for July-September quarter were settled at
$145/tonne FOB Australia, down by $80/tonne, or -36%, for the same period of 2012
Negotiated monthly contract premium hard coking coal prices for July stood at $145/tonne FOB
East Coast Australia, down by US$2/t (-1.4%) month-on-month
If TSI monthly-lagged prices were applied to contracts, they would have been priced at FOB East
Cost Australia US$136/t for July (the average of June’s daily prices)
July’s month-on-month spot averages fell -2.2% for PHCC, and -5.1% for Hard Coking Coal. Though
monthly prices are down again, spot prices reversed direction mid-month
Between four and five million tonnes of coal stocked at Chinese ports, sufficient for 10-14 days
worth of steel production
Buy-side demand remained weak in July, due to the traditional lull in the construction sector
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Contact TSI:
Tim Hard
Tel: +65 6530 6413
Jarek Mlodziejewski
Tel: +44 20 7176 7618
Serena Seng
Tel: +65 6216 1059
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Prices: Premium Hard Coking Coal Premium hard coking coal prices fell from $135/tonne FOB EC Australia to $131.3/tonne FOB EC Australia in the first week of July on weak demand.
Prices remained mostly flat around $131/tonne in the second week as buyers continued to consume stockpiles, run lean inventories and use domestic suppliers where possible.
Towards the end of July, Australian export prices firmed to $132.8/tonne (FOB) as regional steel mills, especially those in China, emerged to replenish stocks.
On a month-on-month comparison, July‟s premium hard coking coal price fell by -2.6%, to US$132.69/tonne (from $136.29/tonne) FOB EC Australia in June.
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Prices: Hard Coking Coal Despite an initial fall, hard coking coal prices were mostly stable in July on the back of tighter supply, as one Australian hard cok-ing coal mine was undergoing long-wall maintenance.
July was a „U‟ shaped month in pricing terms, with prices starting at US$116.8/t, falling to US$115.7/t mid-month, before increased demand supported a climb to US$117.9/t.
On a month-on-month comparison, July prices stood at $116.5/tonne FOB EC Australia, down by -5.1% from $122.6/tonne FOB EC Australia in June.
The highest and lowest price spread between premium hard coking coal and hard coking coal prices in July were 18.7% and 15.1% respectively.
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July 2013
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TSI Coking Coal Spot Reference Prices, FOB Port East Coast Australia (US$/metric tonne)
* Calendar Quarters
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Reference Price
q-o-q q-o-q
Benchmark Premium Coking Coal 172 4.20% 145 -15.70%
Negotiated Quarterly Contract Proces FOB Port East Coast Australia (US$/metric tonne)
Q2*Benchmark Q3* Benchmark
m-o-m m-o-m
Benchmark Premium Coking Coal 147 -5.16% 145 -1.36%
June Benchmark July Benchmark
Negotiated Monthly Contract Proces FOB Port East Coast Australia (US$/metric tonne)
$100
$110
$120
$130
$140
$150
$160
$170
$180
18/01/2013 18/02/2013 18/03/2013 18/04/2013 18/05/2013 18/06/2013 18/07/2013
TSI Premium Coking Coal TSI Hard Coking Coal Source: TSI
Reference Price
m-o-m m-o-m m-o-m q-o-q
TSI Premium Hard Coking Coal 144.60 -3.12% 136.29 -5.75% 132.69 -2.64% 132.69 -7.20%
TSI Hard Coking Coal 128.51 -3.13% 122.63 -4.58% 116.50 -5.00% 116.50 -8.56%
TSI Coking Coal Spot Reference Prices FOB Port East Coast Australia (US$/metric tonne)
June JulyMay Q3-To Date Averages*
© The Steel Index 2013 ¦ page 2
Demand
Buying interest throughout northeast Asia remained poor amid the traditional „demand-lull‟ season. Chinese steel mills worked through inventories and carried between 5-15 days worth of stocks throughout July, depending on mill size.
The majority of Chinese ports, on average, had 4-5 million tonnes of coking coal. These were sufficient to last 10-14 days. Chinese buyers only emerged to replenish stocks towards the end of July when mill stockpiles become uncomfortably low. However, buying activity was mostly on a critical-needs basis.
Elsewhere in northeast Asia, overall demand in South Korea remained flat as construction activities dialled down for the rainy season. Most steel mills had previously covered their July-August requirements through term contracts, meaning little spot demand.
In India, the wide availability of competitively-priced Chinese coke at $220-240/tonne (FOB China) also hampered buying interest from Indian coke-makers for imported Australian coking coal. Most small-to-medium Indian coke merchants found it more economical to purchase ready-made Chinese coke at a lower cost.
The competitively-priced Chinese coke did not have much impact on the larger mills, which continued to make regular monthly purchases of Australian-origin coking coal.
Crucially, the monsoon season in India impacted construction activity, reducing demand for steel (and coking coal). Smaller mills had reduced production rates to cope with the seasonal lull in steel product sales and had reduced their coking coal requirements. Larger mills continue to maintain their production rates but coking coal buying activity was mostly limited to monthly contracts.
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Supply
Supply remained mixed in July. One Australian miner reduced production at one of its premium hard coking coal mines, while another hard coking coal miner had closed their hard coking coal mine for longwall maintenance.
Despite slightly tighter supply and firm demand for this grade of coking coal, there was little support for firmer prices in July, as there remained ample supply of premium hard coking coal from Australia, despite the reduction in production. The increases in premium hard coking coal prices towards the end of July were mainly a result of stock-replenishing activities and not a result of tighter supply.
Supply was expected to remain sufficient until the end of the year as new coking coal projects from BMA‟s Daunia mine and Anglo American‟s Grosvenor mine are expected to add additional coking coal tonnages.
On the international supply side, outside of Australia some curtailment of N. American coal exports appeared to be underway. With the relatively flat prices seen in the last few months, coking coal producers in the US are starting to feel the pinch due to slim profit margins. In periods of high pricing, miners are able to target thinner seams which may have been too costly in the past. Global competitiveness has increased in recent months. But with higher mining costs, US producers are most pressured.
Over the border in Canada, a visit by the Indian Minister for Steel may benefit producers in the longer term, as India‟s steel industry looks to guarantee its future supply of coking coal through long term agreements. This will be a welcome diversification for local producers, as China‟s economic growth slows from +10%, to something closer to 7%.
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Negotiated quarterly prices
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July 2013
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DBCT Coal Volumes by Destination
TSI Iron ore vs Coking coal price
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
China India Japan Europe Source: DBCT
$130
$180
$230
$280
$330
Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 Oct 12 Apr 13
Quarterly Settlement FOB EC Australia (Premium) US$/t
$100
$110
$120
$130
$140
$150
$160
$170
$180
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13
62% Fe 3.5% Al CFR Tianjin (US$/t) 58% Fe CFR Tianjin (US$/t)
PHCC FOB Australia (US$/t) HCC FOB Australia (US$/t)
© The Steel Index 2013 ¦ page 3
TSI on the Market—August
Dissonance due to “spot” versus “contract pricing” reared its head as July closed out, but after seven months of falling prices, this perpetual thorn in vendors‟ sides may be about to be alleviated. Possibly.
The relative strength of coking coal will be tested as other raw material prices are suggested to be pressured. If coking coal prices are to strengthen, they must do so from coking coal fundamentals alone: market participants are not expecting a „lift‟ from elsewhere.
August tends to be silly season in Europe as buyers‟ thoughts turn to holidays, rather than stocking up battery-feed. Expect settlements to be sought quickly.
EU/Japan
Waning coking coal prices have not only weighed on the mining majors: diversified producers and suppliers such as ArcelorMittal have been seen cutting profit forecasts due to lower metallurgical coal prices (and margins). Furthermore, with excess European steel capacity weighing on finished steel prices, demand for coking coal has remained luke-warm.
Competitively-priced Canadian material arriving at European ports has disadvantaged higher-cost US producers vying for market share and, with rumours that the next monthly benchmark with be lower than that for July, the situation for them does not look to improve in the short-term.
The weaker yen, whilst helping Japanese steel exporters, will also serve to erode any gains as Japan relies heavily on iron ore and coking coal imports, which have become (comparatively) more costly.
China
In the first half of 2012, China imported approximately 28 million mt of coking coal, which (on an annualised basis) represents about a quarter of the total estimated seaborne market for 2013. Much of the remaining tonnes were spread between Japan, South Korea, Taiwan, India and the EU. However, given the propensity of Chinese buyers to buy on the spot market, much of the recent attention has been focused on that area. Spreads to iron ore (CFR China basis) narrowed during July as iron ore recovered and coking coal maintained its downward trajectory.
Improvements to Chinese steel market prices have been seen over the last five weeks, giving more hope to their key raw material supply partners. It remains to be seen whether that is sustainable.
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July 2013
Contact The Steel Index (TSI)
SINGAPORE CHINA UNITED KINGDOM UNITED STATES
12 Marina Boulevard #23-01 Room 3301-03, Shanghai Plaza 20 Canada Square, 12th Floor 424 South 27th Street
Marina Bay Financial Centre 138 Huai Hai Road Canary Wharf Suite 306
Tower 3, Singapore 018982 Shanghai 200021 China London E14 5LH Pittsburgh, PA 15203
Tel: +65 6530 6413 Tel: +86 21 5110 5490 Tel: +44 20 7176 7618 Tel: +1 412 431 0584
Fax: +65 6532 2700 Fax: +86 21 5110 5480 Fax: +44 20 7176 7961 Fax: +1 412 431 4371
Tim Hard
Han Xun
Jarek Mlodziejewski
Kurt Fowler
TSI Coking Coal Index
TSI‟s coking coal prices are published daily at 18:30 Singapore/Shanghai time (10:30 GMT).
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