The first tickets have been issued to the annual dance among United States (US) cokemakers and metallurgical (met) coal suppliers. As usual, AK Steel opened the gate. SunCoke stood at its side, prepared to greet invited guests.

There doesn't appear to be anything unusual about the tenders. AK Steel requires coal for delivery during 2018 to the Middletown Works in southwest Ohio and to the Mountain State Carbon (MSC) cokemaking plant in Follansbee, WV. Both CSX- and Norfolk Southern (NS)-origin sources are in consideration.

Slam dunk no more

There are some moving parts, and US producers have some reasons for optimism. The market landscape "looked pretty much like a slam dunk for buyers until a few weeks ago; where sellers would have felt compelled to accommodate whatever numbers were penciled in," one US producer said; "not anymore."

Fortunes have shifted.

"The falling knife has stopped falling for seaborne coking coal because of short -term supply disruptions and the inability of Nippon (Steel & Sumitomo Metals) to make a decision as to what Q2 and Q3 HCC prices might be," the source said.

Moreover the US steel industry, and by extension the coke and met coal industries, expect good news soon via the Trump administration. That is a big deal because the US coke market is "sitting on a razor's edge," an industry source noted.

At North America's practical cokemaking capacity, the market is "probably structurally long by 600,000 to 700,000 st," a source said. But some US coke plants are dialed back and could see their requirement increase. Beyond that, US Steel could flip the equation.

"If US Steel were to restart one of the furnaces at Granite City, you're close to being in balance in North America" on coke supply/demand, a source said. If both furnaces were restarted, "you're in a short position."

Motivation could be at hand.

Trump tariff talk

Under Section 232 of a 1962 trade law, the President can impose tariffs on imported steel as a means to protect national security. President Trump is expected to do just that.

For more on the potential for President Trump to put import tariffs on Chinese steel imports and how the international market is influencing the US price negotiations, subscribe to our coal news and insights. Signup for your free trial today.

Jim Thompson is Director of Coal at IHS Markit.
Posted 19 July 2017

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.