Chinese prices of coking coal are seen softening this month amid a mild glut, as expected declines in hot metal output at steel mills will continue to weigh on met coal demand while supply may enjoy a slight uptick, according to Mysteel’s latest monthly report on the commodity.
In December, China’s coking coal prices displayed an inverted U-shaped trend overall, Mysteel Global noted, with prices jumping at first – sourcing momentum from tight supplies – before retreating due to languishing demand from mills.
The tight supplies in part stemmed from the stringent safety checks on coal mines in North China’s Shanxi and Northeast China’s Heilongjiang provinces conducted by authorities in response to local coal mine accidents, as reported. In addition, stoppages for year-end maintenance carried out at state-owned coal mines across the country also dragged down raw coal output as a whole, the report pointed out.
Accordingly, total coking coal stocks held by the Chinese coal miners under Mysteel’s monitoring nationwide, whose coal mining capacity accounts for 30% of the country’s total, contracted by about 3.7% from November to reach 2 million tonnes as of December 29. The volume was also 25.6% lower than the year-ago level, Mysteel’s data show.
Nevertheless, the faltering demand from mills for the steelmaking material took hold in late December and depressed prices, negating the support these had received from the tight availability, the report noted.
China’s national composite coking coal price under Mysteel’s assessment had been tracking downward since December 22, falling to Yuan 2,117.8/tonne ($295.5/t) including the 13% VAT by January 4 and losing Yuan 47.7/t over the period.
The report explained that the mills’ preference for controlling production – rather than suffer meagre profits – and widespread maintenance stoppages of blast furnaces combined to keep hot metal output at mills falling last month. This consequently translated to a marked decline in mills’ demand for coking coal, especially their demand for expensive brands.
Moreover, the decrease in hot metal output has extended into this month. Mysteel’s latest survey among the 247 Chinese steelmakers under its regular tracking show that their daily hot metal output averaged 2.18 million tonnes/day during December 29-January 4, dipping by another 31,100 t/d or 1.4% on week.
Looking ahead, hot metal output at mills is expected to sustain falling this month, the report predicted, saying that mills will likely scale back production further to contain losses, as there are no signs that steel prices will improve while the usual winter lull continues to hamper steel consumption.
The resultant waning demand for coking coal will stand in contrast to a slight rise in supply as many coal mines will resume operations in coming weeks, inflicting downward pressure on coking coal prices, the report concluded.
