Coking coal inventories further declined at key production areas in China, as environmental checks in Inner Mongolia restrained local production, adding to the existing supply strain when coking plants were striving to build stocks to rational levels.
Sxcoal data showed on March 10, the raw coal production held by the surveyed coking coal mines fell 161,300 tonnes week on week to 9.45 million tonnes, with the capacity utilization retreating 1.60 percentage points to 93.87%.
“Coking coal production is weak as a whole in Wuhai (of Inner Mongolia) due to ongoing strict crackdown on open stack and unqualified coal storage facilities. It remains unclear when the mines and washing plants that were requested to suspend production will resume normal operation,” said one source with a local washing plant in the region.
Raw and washed coking coal inventories in the surveyed mines extended the decline, falling 416,500 tonnes and 305,600 tonnes from the week-ago levels to 1.34 million and 868,400 tonnes, both at their respective low levels, Sxcoal data showed.
Some mines’ coking coal stocks even hit the lowest in a year, amid resilient hauling by coking plants.
“With a weaker availability of coking coal at mining areas, coking plants have to consent to the growing offers from miners until they build inventories to rational levels,” said a second source with a coking plant in Hebei.
Sxcoal data showed the coke stocks held by the surveyed coking plants slumped 21,700 tonnes week on week to 285,800 tonnes on March 10, hitting a comparatively low level.
The prevailing offers of lean coal and meager lean coal at major mines in Changzhi of Shanxi further gained 80-100 yuan/t on March 14, marking the third price adjustment, which has brought the accumulative increase to 160-250 yuan/t since early February.
However, high coking coal offers have slightly daunted some traders and washing plants from buying.
The number of bidders participating in the online auctions in Shanxi declined, and a few auctions of mid-sulfur primary coking coal and lean coal supplies by independent washing plants were heard to have aborted, Sxcoal learned.
“The market needs some time to digest the fast rise of coking coal prices in the past week, which has outpaced the increase of coke prices over the same period,” said a third source with a coking plant in Luliang of Shanxi. “But the tight fundamental would continue to shore up the feed coal prices, although it is less likely to see dramatic increases again,” he added.
Pandemic outbreaks weigh on coke demand outlook
The spreading outbreaks of the pandemic started to cast a shadow on the demand outlook for the downstream steel market.
While the market was generally optimistic over the post-Two Sessions demand for steel and steel-making raw materials, the fast-expanding infections nationwide started to cripple the resumption of construction activities.
Slowdown or suspension of construction activities was observed in some building sites in Shandong, one of the worst-hit provinces at present. Similar approaches would be imposed in more areas with growing infections reported.
Investors started to worry about the near-term demand for coke. On March 14, the most-traded coke contracts on the Dalian Commodity Exchange closed at 3,429 yuan/t, slumping 7.69%. The most-active coking coal futures declined 9.81% to 2,798 yuan/t on the same day.
The port-side spot offers of coke weakened. Offers of Quasi Grade I coke at Rizhao port in Shandong declined by around 50 yuan/t to 3,550 yuan/t, ex-stock with VAT.
This article has been exchanged under article exchange agreement between CoalMint and SX Coal.
Leave a Reply