China’s metallurgical coal and coke supply are likely to further tighten as the outbound delivery from Shanxi, the top production hub, is subject to tight inspections amid growing COVID-19 cases.
Shanxi detected eight locally-transmitted infections on April 5, the number which seems small compared with some other countries but hits the highest for the province in near a year, according to data released by the country’s health authority.
The local governments in Shanxi have imposed tight traffic restrictions in some virus-hit areas in an effort to quickly wipe out the virus and effectively stop the potentially fast-spread variant as seen in other provinces and cities.
Some Shanxi-based miners and coke producers contacted by Sxcoal saw a significant slowdown in outward road transportation. “Drivers have to take much time to bypass some containment areas, and for cross-provincial delivery, they are required to showcase their negative test result for the virus within 24 or 48 hours during entering,” one Linfen-based miner in Shanxi said.
“There is also limited rail capacity left for coking coal, especially during the agricultural material transport peak,” said a second miner source in Taiyuan of Shanxi.
The tightening transportation curbs in Shanxi came at a time when mills in the leading steel city Tangshan in neighboring Hebei province accelerated replenishment after lockdowns were partially lifted in some areas, adding to the regionalized supply squeeze.
Settlement continued climbing at coking coal mines that were less affected by the pandemic in Shanxi. Auctions of low-sulfur primary coking coal (S 0.5%, G 85) at mines in Linfen were concluded at 1,680-1,725 yuan/t, ex-washplant with VAT, up 19 yuan/t compared with the week-ago level.
Some miners in Jinzhong of Shanxi raised the offer of fat coal (S 1.7-1.8%, G 90) by 100 yuan/t to 3,050 yuan/t, ex-washplant with VAT, adding to the total rise of 700 yuan/t since March 1, although no deal was heard to have concluded at the new price.
Miners in Wuhai of Inner Mongolia held offers firm after raising prices by 50-100 yuan/t ahead of the three-day Qingming Festival holiday during April 3-5. While the environmental checks and the resultant weak capacity utilization at local mines and washing plants continue restraining coking coal production, supply disruption in Shanxi may also add supply strain to one of the major supply hubs.
Low-sulfur fat coal (S 0.8%, A 12%) was offered at 2,550 yuan/t and 2.4%-sulfur grade was offered at 2,200 yuan/t, ex-washplant with VAT and in cash.
Coke producers propose 200 yuan/t price hike
Due to tight spot cargo availability and high restocking appetite from mills, a group of coke producers in Shandong, Shanxi and Hebei proposed to raise coke prices by 200 yuan/t, mostly effective on April 7.
The futures market also saw strong strength. On April 6, the most-active coke futures on the Dalian Commodity Exchange ended at 4,074.5 yuan/t, up 2.75%. The most-traded coking coal futures on the bourse closed at 3,240.5 yuan/t, up 0.68%.
Port-side coke market was bolstered by the bullish futures market and optimistic demand outlook, and traders were increasingly inclined to reserve stocks for higher bids, Sxcoal learned.
The Quasi Grade I coke was offered at 3,850-3,900 yuan/t at Rizhao port in Shandong, ex-stock with VAT, up around 400 yuan/t from a recent low.
Despite the pandemic, Chinese market participants expected the demand for steel and steel-making materials to rise as a whole in the second quarter backed by infrastructure investments and peak construction demand to catch up with the building schedule.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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