Asia met coal finally reacts to coronavirus pandemic with sharp weekly fall

Posted on 03 April 2020

Source: S&P Global Platts

The metallurgical coal market finally began to experience the impact of the coronavirus pandemic 10 weeks since its outbreak, with metallurgical coal spot prices across all grades falling more than $10/mt this week, S&P Global Platts data showed.

"I haven't seen prices moving down so fast and so much in a short span of time," a Chinese trader said, with each trade tending to be $5-$10/mt lower than the previous trade in the span of a few days.

Spot prices were erased more than $10/mt across all grades on the week. Platts PLV FOB Australia and CFR China saw prices decline by $12/mt and $17.25/mt respectively, assessed at $140/mt FOB Australia and $146.75/mt CFR China Thursday.

Lower grades of coals were not spared from the rout. HCC 64 Mid Vol CFR China lost $16.50/mt on the week, and Low Vol PCI suffered a decline of $12/mt. HCC64 Mid Vol CFR China was assessed at $133/mt CFR China and Low Vol PCI at $90/mt CFR China Thursday.

The swift decline in spot prices was attributed to the sudden surge in spot cargoes as producers looked to sell May laycan cargoes, on top of a push back of tonnage from term customers.

A producer source said that it was not the time to be picky with buyers and prices. "If term buyers are pushing back tonnes, you cannot afford to be picky. When the selling pressure is there, you are to sell," he said.


Spot availability


Participants said they were expecting more non-mainstream spot cargoes to emerge on the market in the near term. There were already signs of this, with some Canadian and Russian coal availability heard on the spot market, some of which were understood to be coals meant for term customers, sources said.

Meanwhile, there was a common consensus that producers may not cut their production so soon. "It's a matter of...[what] profit margins they are making. They are merely making lesser margins [during this period]...but it's not a prolonged period of loss making," a Chinese end-user said.


China hopes


Many sellers are pinning hopes on China, the clearing market for excess spot cargoes, but steelmakers in the country are grappling with their own challenges – poor downstream steel sales, thin profit margins and challenging port policies.

"Currently, I think the Chinese market can absorb all these cargoes. However, much of it will also be dependent on the steel market. There is already an immense pressure on steelmakers and their profit margins," a Chinese buyer said, adding that the fifth round of domestic coke price cuts had just been proposed this week, another indicator of weak demand from steelmakers.

Platts MVS hot rolled coil domestic steel mill margin was assessed Thursday at a loss of $12.36/mt while the domestic rebar margin was positive at $33.51/mt.


"Yes, the Chinese buyers can absorb all these cargoes. It's a matter of price," one Chinese trader said.

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