Chinese prices of metallurgical coal are likely to slide in the first half of March due to sluggish demand from downstream coke firms and steelmakers, according to Mysteel’s latest monthly report on the commodity. For the second half of the month, however, an improvement in demand is expected to bring an end to the downtrend and keep prices stable, the report forecast.
In February, the Chinese met coal market was largely weak – the market was muted over February 10-17 due to the Chinese New Year (CNY) holidays, while the trading remained listless afterwards, with few inquiries from end-users, market sources said.
The reason behind was the sparse restocking demand for the material from downstream users, as they gave priority to consuming their existing stockpiles of the materials that had accumulated to rather high levels, the report explained.
For example, as of February 23, almost a week after the CNY holiday ended, the coking coal stocks at the 230 independent coke firms and the 247 Chinese steel mills under Mysteel’s tracking stood elevated at 8.58 million tonnes and 8.45 million tonnes, still higher by 0.7% and 1.44%, respectively, than the year-earlier levels, Mysteel’s data show.
Meanwhile, continuous reductions in coke prices demanded by mills after the holiday, as reported, also dampened the sentiment in the met coal market, which dented coke makers’ demand for coking coal last month, the report concluded.
As a result, a decline of Yuan 50-150/tonne ($6.9-20.8/t) in total was observed in met coal prices of varied grades within February, Mysteel’s tracking data showed.
Meanwhile, China’s national composite coking coal price under Mysteel’s assessment fell by Yuan 48/t on month to reach Yuan 1,990.4/t as of February 29.
Although most coking coal miners were active in restarting after the CNY holiday, the activity of resuming operation among some coking coal miners in North China’s Shanxi was somewhat cooled by the local authorities’ escalated regulation on mines’ overproduction, with some miners even curtailing output last month, Mysteel learned.
Mysteel’s data showed that over February 22-28, the daily output of raw coal at the 523 thermal coal mines under its survey nationwide was 1.89 million tonnes, still lower by 12% than the corresponding lunar period last year though increasing by 3.8% on month.
Looking into March, the demand for coking coal is anticipated to remain tepid for a while as both coke firms and steel mills – still struggling with severe losses – are reluctant to ramp up production, while supplies of coking coal are bound to grow. As such, weak fundamentals in the market for met coal will weigh on the prices, the report said.
Nevertheless, Mysteel learned from sources that some domestic coke firms plan to put some new production capacity into operation this month. An uptick in demand for feed coal that may ensue, coupled with the recovery of restocking demand among met coal users after drawdowns in their stocks, will lend some support to coking coal prices late in the month, the report predicted.
Written by Irene Zhuang
