Century Commodities Solution coking coal and metallurgical coke trader Jiang Tiankuo sees a sluggish return of Chinese buying interest for Australian coking coal due to a negative arbitrage.

Jiang said at Thursday’s Kallanish Asia Steel Markets 2023 event in Ho Chi Minh City that China has not yet returned to the Australian coking coal market due simply to this factor.

"There was panic in the ex-Chinese market for the strong return of Chinese demand for Australian coal but the reality is China does not need Australian coking coal to produce quality steel as they can have their blending to adjust their profitability. So, China will only start to buy Australian coking coal when arbitrage makes sense," he told delegates.

According to him, Australian coking coal prices will continue to fall in the short term due to increasing supply, and will bottom at about $280-$290/tonne fob Australia. This is the level at which Australian and Chinese coking coal prices find equilibrium, when arbitrage is zero.

Meanwhile, Kallanish Consulting Services consultant Ian Roper said that China is likely to be a price sensitive buyer to a large degree, unless there is a significant disruption to domestic supplies.

Having said that, he sees the metallurgical coal market remaining fundamentally strong, aided by China's return.

While Chinese met coal and coke prices remain weak, Roper observed that China's return to the Australian low-volatile hard coking coal import market, even in limited form, is adding marginal tightness given the country's structural need for premium met coal. Imports of this material would only displace domestic supplies.