US tariffs to have limited impact on global coking coal supply

US coking coal exports could fall prey to US tariffs on US steel imports, but while the US is the second largest offshore supplier of coking coal after Australia, the impact on the global market will be limited, market sources say.

US coking coal will logically move towards the domestic market, given that US steel production is likely to increase to offset the expected decline in imports.

But electric arc furnaces, which use scrap metal rather than iron ore and coking coal, account for the bulk of the country's steel production at about 70%, according to the American Iron and Steel Institute in 2017, limiting the likely impact on the coking coal market.

According to two market sources, US coking coal exports to the offshore market will decline by only 1.5 million to 3 million tons. Another possibility could be US imports of more coke in addition to any potential shortages.

The United States exported 49.5 million tonnes of coking coal in 2017, according to the National Mining Association, with exports accounting for 75% of total coking coal production.

According to a Goldman Sachs report published in February, the offshore coking coal market was valued at 295 million tonnes in 2017.

In addition, since the US is a marginal supplier of coking coal to Asia due to high freight costs, senior analyst at Wood Mackenzie Prabal Bharghava said this should mean minimal impact on Asia.

Bhargava also expects Australia to fill any possible shortfall in US coal.

But even if tariffs do not strongly affect coking coal volumes, one market source said the uncertainty caused by tariffs could hinder global steelmakers' goals to reduce their reliance on Australia for coking coal.