Spot coking coal prices in Asian continued to drift lower Monday as Chinese buyers, unnerved by last Friday's real estate cooling measures, held back on importing.
The new measures, which include a rise in capital gains taxes on property sales and higher downpayments for second home mortgages, were announced late Friday.
"The real-estate cooling will pressure carbon steel materials, including coking coal," a supplier predicted Monday.
Perhaps reflecting the Chinese steel market's dependence on construction, Chinese steel futures and iron ore started the week in the red, with Shanghai rebar's October contract last traded Yuan 115/mt on Monday at Yuan 3,095/mt ($627/mt) and Platts' 62% Fe imported iron ore down $3.50/mt to $146.50/mt CFR North China.
But such impact on metallurgical coal was not visible, maybe owing to a general lack of liquidity ahead of April-June contract negotiations.
A mining source implied that he would avoid offering cargoes to the Chinese market this week given lackluster demand.
"It is not a good time to talk about price, as you need to give a really low price to attract buyers," he said.
Perhaps indicative of latent demand building in the market, some buyers said that although they could potentially buy now, they would rather wait, fearing further falls in prices.
The seaborne market's fate seemed to remain closely linked to China's appetite, as the country was by far the most likely destination for spot cargoes, a Brisbane-based miner said.
Platts assessed premium low-vol hard coking coal $0.50/mt lower at $17.50/mt FOB Australia and second-tier HCC also $0.50/mt lower at $152.50/mt.
Supporting tradable values, indicative bids for Australia's top low-vol brands remained close to $180/mt CFR.
For second-tier HCC, actual buying interest from end-users could be found at $150-160/mt CFR China according to three purchasing managers from east and south China.
A Shanghai trader pegged the tradable value for Australian second-tier HCC at around $160-165/mt CFR for Australian HCC with 62-63% CSR, 22% VM, 8% ash and 0.3-0.4% sulfur, but would pay no more than $158-159/mt CFR China to take position for such coal due to market uncertainty.
But lower market sentiment did not deter sellers from floating higher offers. Mid-vol Australian PCI, for example, was offered at $160/mt CFR China late last week for 14% VM and 9-10% ash. The 110,000 mt cargo was offered for end-March laycan.
A Chinese trader however felt that the market on Monday was definitely worse off than last week. Abundance of mid-vol PCI supplies was said to be one factor, with the source citing up to six offers received since late last week, in his opinion dispelling any myth of tight supply.
He would only consider bidding at $135/mt CFR China Monday for mid-vol materials when compared to above $140/mt CFR levels last week.
"The property market is bad. It might still drop even more. No one wants to take any coals," he added.
BMA OFFERS APRIL AT $172-175/MT
BHP Billiton-Mitsubishi Alliance Friday and Monday offered April loadings of its flagship premium low-vols to several Asian and European steelmakers at $172-175/mt FOB Australia, mill sources reported.
The price applies to Peak Downs and Saraji, with premium mid-vol Goonyella heard offered $2-3/mt lower. Different customers reported being offered slightly different prices.
A European steelmaker thought these prices should be "at least $3-4/mt lower," citing weaker spot prices. "Even when taking into account weather disruptions, prices went lower," he said.
A London spokeswoman for BHP Billiton would not comment or confirm the prices.
MILLS EXPECT NO CHANGE IN PRICING MECHANISM
There was some speculation in the market regarding likely pricing mechanisms and procurement habits for 2013-2014, with new contracts starting April 1 representing an opportune time for any potential amendments.
Four mills in Asia and Europe predicted there would be little change, with BMA continuing to offer monthly pricing, and other mostly quarterly and the occasional annual price.
One mill source predicted that the current system would be likely to persist "as long as the quarterly price remained close to spot."
He added that for mills to be confident buying more spot, the industry needed hedging tools, but lamented that these "were not there."
In terms of procurement strategy, a purchasing executive at one European mill said the company would further increase the proportion of coal it buys on a spot basis, from about 20% two years ago to 30-50% in 2013-2014.
This will enable the company to better deal with the current poor steel demand, and reduced capacity utilization, the source said. He added that the company would aim to include lower quality coals in its blend, even if this meant producing lower-quality coke.
Another mill source said the plant could imagine reducing its monthly-priced volumes, replacing them with spot, but that it would not change terms of contracts with "reliable suppliers" with whom it has long-term relationships.
Source: Platts