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China’s coking coal market strengthens

China’s domestic coking coal market sentiment turned around due to a combination of growing demand and falling supply. The expected price rally in the downstream coke market also bolstered the outlook, possibly sending coal prices higher upon materialization.

Coking coal supply remained relatively tight in key producing regions on sustained safety inspections, despite a few coal mines recovering operations from previous suspension.

For demand, recent price rallies in downstream coke and steel markets stimulated their production activities. Some long-stalled blast furnaces have been reignited. Coal demand, as a result, increased, helping the raw material prices stabilize after months of decline.

“We have lifted production capacity utilization to 85% currently as dry-quenching coke shipments are faring quite well,” one Shanxi-based coke producer said. Despite the sales improvement, its profit margins remained negative, preventing him from running at a full tilt.

Like the producer, more others are desperate for a price rally in the market. According to their description, they have made up their minds to make it happen. Otherwise, they would cut off the supply if steelmakers don’t accept.

“Now, we are eying at least two rounds of price hikes,” said a Hebei-based coke producer.

“It’s almost a sure thing to realize the first round of rally, as many steelmakers give tacit consent to that,” a Shaanxi-based producer said. He also noted a 100 Rmb/t rise at several coking coal mines in the vicinity even though the coke prices haven’t yet started to increase.

Even though the first rally can be realized, for coke producers, two more rounds are needed to help them become profitable due to a coal price increase in sync.

On April 15, the CCI index for Shanxi low-sulfur primary coking coal grew 42 Rmb/t from last Friday to 1,800 Rmb/t, ex-washplant with VAT, while that for mid- and high-sulfur primary coking coal stood at 1,540 Rmb/t and 1,534 Rmb/t, respectively, up 60 Rmb/t and 61 Rmb/t.

Rising ferrous futures prices also added upside strength to the market. On April 15, the most-traded coking coal futures for May delivery on the Dalian Commodity Exchange ended the daytime session at 1,740.0 Rmb/t, up 66.5 Rmb/t from the previous trading day, while the metallurgical coke futures rose 62.0 Rmb/t to 2,187.0 Rmb/t.

Mongolian coal market rebounds

In the import market, Mongolian coking coal prices bounced back in the wake of consecutive declines as inquiries increased at Ganqimaodu border crossing. Spot offers for Mongolian 5# raw coal came in at 1,250 Rmb/t, while that for Mongolian 3# washed coal gained 50-100 Rmb/t from a previous week’s low to 1,420-1,450 yuan/t, ex-stock Ganqimaodu with VAT.

Online trades on the Mongolian Stock Exchange also registered an uptick in settlements. On April 15, Mongolian miner Energy Resources LLC concluded an auction of Mongolian 3# washed coking coal at 1,190 Rmb/t, up 30 Rmb/t from April 12, while another auction of washed mid-ash semi-hard coking coal was closed at 460 Rmb/t, up 30 Rmb/t from April 10, both delivered to Ganqimaodu border port and exclusive of VAT.

Source: Sxcoal