Soaring prices and contract defaults in metallurgical coke markets this year have prompted market participants to switch to index-linked prices
OREANDA-NEWS. Soaring prices and contract defaults in metallurgical coke markets this year have prompted market participants to switch to index-linked prices, with the first deal done on the Argus 65 CSR met coke fob north China index last month.
Chinese export met coke prices have doubled this year, with rapid increases in April and August leading to defaults on some Chinese export cargoes. The Argus 65 CSR met coke fob North China index has more than doubled this year, rising by 102pc to $232.15/t fob north China last week from $115/t at the start of this year.
A European trading company sold a September-loading 45,000t met coke cargo to an Indian steel mill indexed to the Argus 65 CSR met coke fob north China index average for late August. This is the first deal linked to the index.
"Prices are rising too fast and we do not know how to offer now," an official at a major Shanxi-based coke plant said.
Three or four met coke export cargoes loaded from China in August defaulted, according to an Argus survey. Most August-loading export cargoes were done at fixed prices from July, when the Argus 65 CSR index was priced in the low $150s/t fob north China, leading some sellers to default after prices surged in August.
"We have an (August) cargo, which was done at some $150/t fob in July, but the supplier is requiring us to renegotiate the price as they could not secure cargoes at former prices," a major overseas buyer said.
China started to implement effective supply-side reforms of its coal sector this year. This, combined with heavy rainfall in early August that damaged road and rail links in Shanxi and Hebei, has reduced supply of coking coal feedstocks.
Offer prices have increased this week ahead of Argus' weekly assessment on Thursday. A major exporter does not have any spot cargoes available until late October. The market level for is $240/t fob north China for 65 CSR and $237/t on the same basis for 62 CSR, the exporter said.
Another major exporter is looking to offer an October-loading cargo of 65 CSR at around $250/t fob north China, anticipating further gains in coking coal prices.
Premium hard low-volatile coking coal prices rose by $15.75/t to $156/t fob Australia yesterday, an 11.2pc increase from the end of last week. Prices have risen 60pc from $97.55/t at the start of August. Heavy rains and mine problems have hit coking coal output in Australia's Queensland state in recent months, supporting prices.
China produced 37.3mn t of met coke in July, down by 0.8pc on a year earlier. January-July output fell by 3.8pc from a year earlier to 253.2mn t, according to the data from the China Coal Transportation and Distribution Association.
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