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The summer increase in coking coal prices has led to greater volatility in spreads between grades, as second-tier coals more slowly kept up with a surge led by premium coals.

PCI's stable contract demand, longer-term pricing, and alternatives for injection in China and markets outside may have limited spot price gains.

Second-tier hard coking coal -- assessed by S&P Global Platts as HCC 64 reflecting weaker CSR than premium coals -- saw prices regain relative strength. This followed sudden daily increases tracked since last week in the China CFR market.

Price increases for HCC 64 of $3.50/mt on Monday from Friday, and on August 23 of $6.25/mt, outpaced those Platts assessed the same day for Premium Low Vol CFR China.

PLV was assessed Tuesday at $145.75/mt CFR China, up $7/mt, and HCC 64 at $136.25/mt CFR, up $6.25/mt. Mid-tier PCI at $94/mt CFR, rose $2.75/mt from Monday.

These moves contributed to HCC 64 valued Tuesday at 5.6% over its 30-day trading history with PLV and mid-tier PCI, according to the Platts China CFR Met Coal RSI Tracker.

The tracker generates daily indexes which are indicators of relative strength and weakness for each coal type compared with peers, against trading history.

Meanwhile, mid-tier PCI was 6.9% below on a 30-day basis, while PLV was pricing accordingly to recent price trends, with the RSI for PLV CFR China scoring minus 0.02%, according to the Platts China CFR Met Coal RSI Tracker.

The trend was more pronounced on a 60-day basis, suggesting HCC 64 and mid-tier PCI's developing pricing pattern, at least based on spot price history over the past three months, has led to more diversion from historic relativities.

The Platts RSI indexes for HCC 64 and mid-tier PCI moving back toward historic values will be dependent on sustained similar price spreads and/or price moves reducing intragroup spreads, for one pair or for all three.

HCC 64 RATIO

HCC 64 as a proportion to PLV has been strengthened by the recent price increases. In the China market, a price premium of 6.51% for PLV over HCC 64 seen Tuesday however supported PLV, after a sustained trend for Chinese low ash seaborne demand contributed to a PLV price premium over HCC 64 of 4.8% for the year to date.

Collectively, daily prices for the three imported met coal grades in China have not posted a fall in over two months, and PLV's price premium over HCC 64 has ranged from 3-11% over that time.

The strength in HCC 64 could persist, given Chinese preference for low ash coals and signs of restocking in the spot market, coupled with wary contract buyers.

Some mills are moving to reduce procurement open for spot volumes, and traditionally exposed second-tier coals more for spot.

The market was propped up so far this year by flooding and heavy rain in Australia and China, and mine capacity closures.

It may now find renewed strength sourced more from the demand side, coming after the last such round stemming from the spring steel price spike.

On an FOB Australia basis, a similar analysis valuing daily met coal's relative strength showed Premium Low Vol's price appeared weaker relative to the 15-day through to 60-day history, and similarly HCC 64 above, and mid-tier PCI below the trading history.

As for PCI, the RSI on CFR China data indicates mid-tier PCI has been relatively weak over the two HCC prices since June 1, and its spot price as a proportion of PLV has slipped below 66%, from

close to 80% on June 1.

Traders said PCI prices may may claw back strength, and an 81% ratio in the Q3 benchmark would lead the contract PCI price to move higher from spot levels, whatever the final outcome for the quarterly HCC benchmark to be agreed for Q4.