Buying activity in the coking coal segment in Australia has remained muted, with most buyers still sitting on some sufficient stocks and not being in a rush to refresh them amid the mounting bearishness in the global steel market. The recent collapse in spot and futures prices in China has triggered extra caution towards new coking coal bookings. “We are already bleeding badly with the prices of cargoes from March-April-May and Chinese dumping of coke at cheaper than coal prices. We are highly worried about surviving the coming quarter,” a representative of an Indian steelmaking mill stated. The recent announcement of adjustments in royalty rates by the Queensland authorities has rippled across the industry, with most market players criticizing the anticipated changes, not only with regard to the alleged rise in production costs, but also in consideration of the impact on the future investments in the region. As SteelOrbis reported earlier, from July 1 mining companies in Queensland will pay 20 percent royalty on prices exceeding A$175/mt, 30 percent over A$225/mt and 40 percent over A$300/mt. Specifically, the adjustments in question are expected to severely alienate potential investments in the region's economy. “This was an easy way for the government to get revenue quickly. However, I'm not sure that the long-term implications of that have been thought through,” a market source stated. Although Australian coking coal suppliers are expected to make certain attempts to increase offers amid recent developments in order to shift increased costs to customers, the traders and steelmakers remain quite skeptical as regards any success with regard to that. “I think there will be more support for prices than anything, as miners will eventually try to transfer costs to end-users. However, we still need to watch that closely because the macroeconomy and steel outlook looks so bleak now, with everyone talking about cutting production,” a Singapore-based trader commented. “I do not know how it can impact today's miserable market. I do not think it [changes in royalty rates] makes any difference to be honest. They [Australia-based coking coal suppliers] are so far from losing money. Even with the royalty they will produce every tonne they can,” a major international trader stated.
Meanwhile, today, June 23, a cargo of 75,000 mt of ex-Australia premium mid-volatility hard coking coal (HCCA) has been offered at $390/mt FOB Australia, for July laycan. Another cargo of 75,000 mt of unbranded premium coking coal, also for July laycan, has been offered at $372/mt FOB Australia. In contrast, the customer has been searching to buy a 75,000 mt cargo of premium coking coal at $320/mt FOB Australia.
Given all the abovementioned, SteelOrbis' estimation of the workable levels for ex-Australia coking coal stands not higher than $350-360/mt FOB Australia.