Spot Asian coking coal prices moved sideways Monday as ominous signals from the Chinese steel industry, nagging concerns about lower costs and abundant supplies hurt trading sentiment.
Lower domestic prices continued to be used as a key reason for mills' poor buying indications, according to participants.
"There's almost nothing to be optimistic about in this market," a procurement manager at a Hebei steel mill said. "I'll be going for the cheapest material available -- and that's domestic coal."
Sources agreed that miners' refusal to cut offers in order to entice buyers in China, was squeezing out trading liquidity in an already quiet market.
Platts assessed premium low-vol hard coking coal unchanged Monday at $126.50/mt CFR China. This equated to $113/mt FOB Australia netting back with Panamax freight and $117.50/mt FOB using a Capesize calculation.
Premium coal prices have been mostly rangebound recently, making daily rises or declines of no more than $0.25/mt over the past nine trading days.
Prices for second-tier material were unmoved at $113.25/mt CFR. This was $99.75/mt FOB Australia using a Panamax freight, or $104.25/mt FOB using a Capesize netback.
Top bid indications from several end-users and traders were at $125/mt CFR China for Australian premium low-vol brands like BMA Saraji or Anglo American German Creek. The lowest, last-known offer for such a coal was at $128/mt CFR.
Summarizing the stand-off, an international trader said that while major producers had been "bloody-minded," no buyers had been interested. "The price is at a kind of academic level. People have been holding out to not book at these levels, and they're doing a good job at it. It will be interesting to see how long it will last," the trader said.
Declining steel prices are also heaping pressure on Chinese mills, with both private and state-owned enterprises struggling to generate positive cash flow, sources said.
The most-traded rebar futures for October delivery on the Shanghai Futures Exchange slipped 0.6 percent to settle at Yuan 3,080/mt ($490/mt)after breaching an all-time low of Yuan 3,063 in the previous session.
Market participants continued to finger slumping iron ore prices as a bearish sign that the steelmaking raw materials industries would continue to suffer.
An international trader said the downward spiral in ore should theoretically be positive for met coal as it should have a positive impact on mill margins. "But it softens the mood, as people then see the steel complex as weak," he added.
A Shandong steelmaker agreed: "If iron ore continues to crash, then its impossible that there's a rebound in coking coal."
Platts assessed the 62% Fe IODEX at $98.75/dmt CFR North China, down $1/dmt from Friday. This was a level unseen since September 13, 2012.
However, there was at least one spot of optimism on the supply side- a seller said recent production cuts in Canada, Australia and the US were finally visible in the Chinese spot market. Fewer cargoes were on offer now than earlier in the year, he said.
The futures market was becalmed Monday, after witnessing sharp falls late last week. The most widely traded September coking coal contract on the Dalian Commodity Exchange gained Yuan 4/mt ($0.65/mt) to the last-traded price of Yuan 815/mt. Meanwhile, September coke contract price rose Yuan 3/mt to Yuan 1,151/mt.
