Having continued to find themselves caught in the crossfire between depressed demand for steel and the rising production costs, in particular, due to exorbitant energy costs, global steelmakers have begun to revise their policy with regard to sourcing of raw materials for the future. Apart from that, global steel producers are under pressure from the unclear prospects towards future. Specifically, according to sources, lately two major European steelmakers have cancelled long term contracts with a Colombian supplier of metallurgical coke. “As a consequence, ex-Colombia export blast furnace (BF) coke offers have decreased drastically to $350-370/mt FOB, while low phosphorus nut coke from Colombia is now at levels of $420/mt FOB. It does not make any sense at all,” a major European trader stated. “The current circumstances are developing totally against European steelmakers,” another trader confirmed the recent developments. Besides that, a European steel mill has reportedly withdrawn a long term contract with a Japanese supplier, with “at least two cargoes of met coke being redirected to India now.” Likewise, a major steelmaker in India has withdrawn a few long term contracts for supply of met coke. “Cancellation is our new reality. We have cancelled some long term contracts and are cancelling further. Concurrently, volumes within off-take agreements look shaky for us too,” a representative of India-based steel mill told.
Meanwhile, the sentiments towards the future prospects for the coking coal market remain ambiguous. Notwithstanding significant gains in deal prices and firm confidence of some market players that prices will move up further, other market insiders remain highly skeptical on the sustainability of the uptrend. “The index is determined by some transactions which could be influenced by some spot deals of traders or a steel plant caught short of cargo or speculative positions. But the steel industry is under a lot of pressure. Without steel support and having burned our hands on April-May cargoes we will not risk taking further positions. It is better to stock out then to take further MTM [mark-to-market] losses,” a key Indian source stated.
Meanwhile, today, August 26, SteelOrbis has learned that a Turkish distributor has been awarded 25,000 mt of ex-Australia Premium hard coking coal, brand GYC, at $272/mt FOB Australia. The material is for 1-10 October laycan. A day before that, an offer for 75,000 mt of ex-Australia premium mid-volatility material Caval Ridge, with a mid-September laycan at $268/mt FOB has failed to entice a buying interest, though earlier the prices have reached $285-290/mt FOB Australia earliest. “I do not think there is so much power to pick up in the short term. In Australia, the suppliers are facing the production issues but supply of premium low-volatility coal as well as of premium mid-volatility coal is enough and what BHP is focusing on now is to increase the liquidity into the market to justify the current index price,” a representative of key Japanese steelmaker stated.
Meanwhile, futures prices in the most traded September contracts for ex-Australia coking coal at Singapore Exchange (SGX) have decreased by $7/mt compared to the previous transactions, to $299.5/mt, while for October contract prices dropped by $8.5/mt compared to the previous levels to $299.5/mt. August contract prices have remained unchanged, at $245/mt.