Miner Teck Resources and North American coal suppliers are targeting higher demand in China, after import restrictions were imposed on Australian coals.
The restrictions have led to pockets of stronger spot pricing in China for alternative low volatile matter and low sulfur coking coals and PCIs, compared with other markets able to absorb Australian supplies.
Teck may be emerging as a key beneficiary from its Pacific Rim supplies and flexibility on production volumes next year.
Teck said it has increased met coal sales to China during the fourth quarter at higher pricing levels than for sales outside of China, and plans to sell 7.5 million mt to China in 2021.
Shipping times from terminals in British Columbia to China, compared with US coals on longer voyages, may help traders and buyers meet timing risks and performance in China with market pricing.
A dislocation since mid-October between FOB Australia coal prices with CFR China price indexes may have limited the effectiveness of using derivatives for trade into China, due to wider basis risk.
US cargoes loading at the end of November and in December have seen sales destined for China in the past few weeks, with several premium HCC and low-vol cargoes finding stronger netback pricing in China, relative to FOB-based sales, many which are linked to published indexes.
A coal marketer said there was potential for still higher FOB pricing for cargoes loading in January on Chinese import demand, as indicated by the China CFR premium HCC index prices and coal relativities compared with Australian coals. Platts Premium Low Vol HCC rose $1 to $169/mt CFR China on Nov. 24, with PLV at $98.50/mt FOB Australia.
Uncertainty around China's coal import policy and record high steel and pig iron production through October may stretch the ability of domestic markets to cope with a longer-term absence of high quality Australian coking coals.
Australian coal imports surged in the first half of the year, and already surpassed 2019 total volumes by August, according to China customs data.
A purchasing round ahead of a resumption in Australian imports could lead current met coal spot pricing divergences by origin to close or narrow. There were shared expectations that this may occur in the first quarter, although there is also the potential for a more drawn out shortfall from Australia, sources said.
Comments from Australia's Prime Minister Scott Morrison may be seen as becoming more conciliatory toward China, while a resumption of coal imports was hard to call, a market source said.
Source: https://www.spglobal.com/platts/en/market-insights/latest-news/coal