US coking coal exporters continue to lean more heavily toward Asian markets in an attempt to offset flagging European demand, while Turkey and Brazil also struggle to provide much uplift.
The latest data from the US Census Bureau show 26.6pc of September's coking coal exports heading to Asia, up from a 13.5pc share a year earlier. Japan and South Korea yielded the steepest growth rates over the period, with volumes to these markets rising by 179pc to 548,028t and by 194pc to 410,164t, respectively.
Exports to India rose more modestly in September, to 200,034t from 163,773t a year earlier.
In all, the US exported 1.16mn t of coking coal to Asia in September, down from 1.4mn t in the previous month but up from 500,095t in September 2018.
Some market participants have voiced concerns about whether US coking coal will still be able to price into Asian markets as prices have come down. US suppliers have often taken steps to increase their competitive edge in Asia, such as subsidising high freight costs, but these measures might become harder to absorb in the current global price environment as some US mining companies are being squeezed harder than their Australian competitors, whose operating costs are often lower.
Many US coking coal producers find it challenging to maintain healthy profit margins when fob Australia benchmarks drop below $150/t, whereas Australian producers can typically tolerate lower price levels without too much discomfort. The Argus daily fob Australia index for premium hard low-volatile coking coal is at $133.60/t, and has not been above $160/t fob Australia since 2 August.
The Argus daily fob Hampton Roads index for high-volatile type B coking coal is at roughly a two-year low of $126/t, while the high-volatile type A index is at $134/t fob Hampton Roads — its lowest level since September 2016.
Atlantic markets weigh on volumes
Total US coking coal exports edged down month on month in September, to 4,348,828t from 4,555,769t in August, but were up significantly from 3,706,290t in September 2018.
That said, fourth-quarter exports will need to gather pace significantly if full-year volumes are to catch up with 2018. January-September exports totalled 38,533,940t, down by 8.3pc from 42,039,482t a year earlier, as challenging steel market conditions and reduced operating rates curbed raw materials consumption globally.
The European market remains a particular area of concern for US exporters, exacerbated by the recent wave of announcements from Germany's Salzgitter and Sweden's SSAB regarding the idling of blast furnaces, and ArcelorMittal's decision this week to pull out of its lease agreement for Italy's Ilva.
The US exported 15,935,543t of coking coal to Europe in January-September, including non-EU countries — down from 16,834,407t a year earlier.
Ukraine has played a significant role in bolstering regional imports more recently, with US suppliers able to boost market share after Russia introduced restrictions on its own exports to Ukraine in June.
The US exported 1,744,615t to Europe in September, of which Ukraine took the largest portion at 421,324t. This compares with 1,610,627t exported to Europe a year earlier.
Volumes to Turkey — which US market participants hoped would take off again after tariffs were lowered earlier this year — have struggled to generate major growth. US monthly exports to Turkey jumped sharply in May, but have since dropped as Turkish steelmakers come up against challenging market conditions, with just under 200,000t exported in September.
Some US market participants are currently looking to Brazil to generate some export growth in 2020, but outlooks for this market's coking coal consumption are mixed and the country's steelmakers are facing similar challenges to their counterparties in other regions. The US exported 491,957t to Brazil in September, roughly flat on August but down from 616,250t a year earlier.