Analysis: Freight Fatigue - Why Rising Oil Could Drag PLV FOB Lower, Not Higher

If Brent crude pushes toward $80/bbl amid rising Middle East tensions, freight markets will be reacting fast. For the coking coal market, this isn’t necessarily bullish. In a market weighed down by weak margins and cautious demand, rising freight doesn’t lift FOB — it pressures it.

Oil Drives Freight – But Freight Distorts the Trade

The met coal market isn’t directly tied to oil fundamentals, but it’s tightly linked to the cost of freight. As oil rises, bunker fuel costs inflate, and freight rates climb — widening the CFR landed cost of cargoes across Asia.

Two-Sided Impact — But This Market Tilts Bearish

🔼 In Strong Markets: Front-Loading

Rising freight can trigger front-loading, where buyers rush to secure prompt cargoes before costs rise further. This behavior can temporarily support or even lift FOB prices.

🔽 In Weak Markets: FOB Must Bend

Today’s tone is different:

• Buyers are sitting on weaker steel margins.

• There’s no urgency to buy forward due to sufficient stocks.

• Rising CFR costs make deals uneconomical.

With buyers stepping back, the burden shifts to sellers to discount the FOB price to keep cargoes moving. The higher freight climbs, the deeper the FOB discount needed.

Market Consequence: Freight Becomes Gravity

This isn’t a bullish freight environment — it’s a cost-push drag. Sellers may need to adjust pricing significantly to bridge the gap, especially for end-users unable to hedge rising logistics costs or absorb elevated landed prices. If sentiment shifts or paper prices strengthen unexpectedly, front-loading behavior could re-emerge — but this is not the base case today.

Bottom Line:

Rising oil drives freight up, but in a soft met coal market, it doesn't lift FOB — it pulls it down. Unless demand picks up, the next move in FOB may be lower, not higher, as sellers are forced to absorb the freight risk to keep trades alive.