ASIA COKING COAL: Spot eases a little on China, India buyer resistance

Singapore (Platts)--14May2012
Spot coking coal prices eased a little Monday, as coal users in China and India expressed a lack of interest at current prices levels.

Both premium and second-tier hard coking coals lost $0.50/mt at $223/mt and $191/mt FOB Australia, respectively, dragged down by generally lower indicative bids, and an increasingly bearish macro-economic environment.

Most major Chinese mills Monday seemed willing to consider prices close to $235/mt CFR North China for top Australian coals, but said they would be reluctant to pay much more than this. "Very few plants will consider $240/mt[CFR]," one trader said.

A Chinese steelmaker said Australian coking coal supply seemed less tight than previously thought, and that premium coal was seen "from time to time."

Supply of high-quality coking coal in the domestic Chinese market was limited though and prices were broadly stable, one Beijing trader said, an opinion echoed by a large steelmaker.

For second-tier coals, few offers were heard in the market besides US and Indonesian material. "Good" US low-vol continued to be heard offered at around $185/mt CFR China, a Hong Kong trader said.

Coking coal traders continued to express concern about the negative sentiment in China, and said some customers were struggling financially. "Some mills didn't make payments to suppliers," one Beijing trader said.

There was much debate about China's record steel output in April, especially given poor fundamentals in steel markets, both for long and flat products.

"Lots of steel plants want to expand production to reduce their costs, but downstream steel demand is not good," a procurement manager at a steel plant in East China said. "Demand is poor for air conditioning units and home appliances (typically made with hot or cold-rolled coil), while inventories of heavy plate are very high."

The steel market is "heading nowhere," as Chinese steel output is ultimately dependent on the purchasing appetite of its European importers, which is not doing well, a Singapore trader said.

Meanwhile, China announced a 0.5% cut in the bank reserve ratio to take effect on May 18, releasing Yuan 400-500 billion ($63-79 billion) of liquidity. But steel traders told Platts Monday that continued high steel production could offset the potential positive effect on the steel market of the easing of monetary policy.

--Julien Hall,
--Helena Sheng,
--Edwin Yeo,