Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

UPDATE 1-Coking coal, coke extend rally as China supply dwindles

Published 07/11/2016, 03:36 pm
Updated 07/11/2016, 03:40 pm
© Reuters.  UPDATE 1-Coking coal, coke extend rally as China supply dwindles

* Coking coal surges by 10 pct limit, coke up nearly 7 pct

* China mills' coking coal stocks at all-time low - Argonaut

* Shanghai rebar jumps 4.9 pct to highest since 2014

* Iron ore futures up slightly, China port stocks at two-year high (Adds more comments from trader and analyst, background)

By Manolo Serapio Jr

MANILA, Nov 7 (Reuters) - Steelmaking commodities coking coal and coke extended their rally on Monday in China, with coking coal surging by its 10 percent limit and coke hitting its strongest since 2013, amid tight supply among Chinese steel producers.

Beijing's big push to curb overcapacity in coal has led to the closure of many mines across the country, limiting available supply to domestic consumers and fueling a rally this year.

Coking coal may be in tighter supply than thermal coal used for power, traders and analysts say, as Chinese steel mills struggle to source supply of the fuel.

The most-traded coking coal for January delivery on the Dalian Commodity Exchange DJMcv1 soared 10 percent to hit the exchange-set ceiling of 1,516 yuan ($224) a tonne, a record high.

Coke DCJcv1 also climbed by its 7 percent limit to hit 2,001.50 yuan per tonne, its loftiest since March 2013.

Coke is made from coking coal and used in the process of steelmaking.

Inventory of coking coal among major Chinese steel companies had dropped to nine days, an all-time low, said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

"The market remains very tight. At the same time overall steel demand is good supported by infrastructure, so mills are able to pass on the higher cost of raw material," said Lau.

The price of rebar, a construction steel product, on the Shanghai Futures Exchange SRBcv1 rose as much as 4.9 percent to 2,859 yuan a tonne, its highest since September 2014.

"Chinese steel mills are having difficulty in getting enough coal supply at the moment," said a Shanghai-based trader.

While the government has asked several coal mines to increase output to address the shortage, "it will take at least a month before we see any impact on supply," he said.

Coking coal is in tighter supply in China than thermal coal, said Zhang Min, an analyst with China Sublime Information Group.

"Overall steel mills have not swung into losses so (they) have not put much pressure on Beijing to tame price gains as utilities did," said Zhang.

Market participants are speculating that China may not be looking at any new policies for coking coal anytime soon so prices may have further room to rise, Zhang added.

The rapid gains in coal prices came despite efforts by authorities to repeatedly meet with producers to address the sharp price rallies.

Last week, China's National Development and Reform Commission called a fourth meeting with coal miners "to admonish producers for not regulating their pricing activities." prices were also supported by tighter supply after Chinese authorities launched fresh efforts to reduce steel output in Tangshan, a major production area, to control smog in the capital Beijing and elsewhere, said Lau.

Iron ore was left out of the sharp gains in steelmaking raw materials, with futures in Dalian DCIOcv1 up 1 percent at 508.50 yuan a tonne by midday.

Unlike coal, supply of iron ore in China remains high with stocks of imported iron ore at the country's major ports at 108.6 million tonnes as of Nov. 4, according to data tracked by consultancy SteelHome. SH-TOT-IRONINV

That's the biggest inventory level since November 2014 and stockpiles have risen nearly 17 percent this year.

($1 = 6.7744 Chinese yuan)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.