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Vale said that the seaborne coking coal price averaged US 155/t in Q1 of 2020,11% higher than in Q4 of 2019. Buoyed by disruptions in China’s domestic production during Lunar New Year Holiday and then by regional COVID-19 lockdowns, prices improved steadily from USD 140/t at the beginning of January to peak at USD 163.5/t in the middle of March. By contrast, the second half of March saw a sharp of USD 16/t price decline, due to widespread demand cuts as the pandemic spread across the rest of the world, culminating in lockdowns in Europe and India which led many ports and steel mills to declare Force Majeure on suppliers. With uncertainty high, the seaborne coking coal market is expected to weaken further in 2Q20, with more cargoes being diverted into China from the rest of the world, as well as the reopening of the border with Mongolia for landborne supply into China. Nevertheless, China’s recovery should be a stabilizing influence, while the increasing likelihood of key coking coal supply regions becoming disrupted by COVID-19 may support prices.
In the thermal coal market, Richards Bay FOB price averaged USD 78.5/t for the quarter, 3.3% higher than in 4Q19. The first quarter was defined by a steep downward trend wherein nearly USD 40/t was shed from the peak assessment of USD 95.5/t at the middle of January until the third week of March, driven by increased Indian domestic production and weaker demand across Europe and Southeast Asia. On the March 26th, Richards Bay Coal Terminal declared force majeure in response to the South African government’s 21-day lockdown to curb the spread of COVID-19, causing the index to spike to USD 80/t. The thermal coal market sentiment remains negative with the key feature in 2Q20 being the uncertainties around the COVID-19, impacting industrial demand and power generation, but also disrupting supply regions compound the expected high volatility in prices.