- Safety inspections intensify after Shanxi mine accident
- Mine suspensions tighten coal supply, support prices
Mysteel Global: China’s coking coal prices are expected to strengthen this month amid continued disruptions to mine operations from intensified safety inspections, according to Mysteel’s latest monthly report on the commodity.
Coking coal prices in China had shown signs of weakening during the latter half of May, when heavy rains in many parts of the country started to weigh on the steel market and dimmed the prospect of higher prices for steelmaking raw materials.
Over the week of 15-21 May, the Mysteel Coking Coal Index (MCCI), which tracks coking coal prices nationwide in China, recorded its first weekly decline in over a month, dipping by RMB 5.1/tonne ($0.8/t) by 21 May to RMB 1,363.1/t including the 13% VAT, according to Mysteel’s assessment.
Just as market analysts were expecting that downside pressures would continue to accumulate on coking coal, the market dynamics suddenly reversed following the deadly mine accident late on 22 May in Qinyuan county in North China’s Shanxi province. The accident claimed 82 lives and quickly prompted authorities to launch a mine-safety blitz in the province, as reported.
According to Mysteel’s latest survey on 1 June, safety inspections had been mounted on 130 Shanxi coking coal mines, and while 43 had since resumed operations, 87 remained under suspension.
As a major coking-coal producing region, the extensive mine suspensions in Shanxi resulted in a sudden tumble in domestic coking coal supply. Over 21-27 May, raw coal production among the 523 coking coal mines under Mysteel’s nationwide survey averaged 1.76 million tonnes/day, the lowest daily average so far this year, excluding the two survey weeks spanning 12-25 February when the Chinese New Year holiday disrupted production.
Tightened coking coal supplies have also caused rapid surges in domestic coking coal prices. By 1 June, the MCCI had climbed by RMB 101.2/t from 22 May to reach RMB 1,463.7/t with VAT.
Market players expect the uptrend in coking coal prices to continue this month as the impact of the safety inspections continues to intensify. Soon after the accident, authorities in Shanxi reiterated their determination to crack down on illegal mining activities and thoroughly rectify mine safety hazards in the province, according to media reports.
Such tough statements have fuelled market expectations of stricter controls being placed on mine operations. In fact, many of the suspensions on Shanxi coking coal mines have already lasted more than a week, surprising market watchers who had anticipated stoppages of only three to five days, as reported.
“It’s changes on the supply side that are currently driving changes in the coking coal market. While downside pressures could stem from a potentially weaker steel sector in June, market attention is increasingly shifting towards the risk of tighter coking coal supplies,” said a market observer
“That said, how the steel market performs in the weeks ahead will also influence the tolerance of the mills to high costs for raw materials, which would further limit the upward room for coking coal prices,” he added.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
Leave a Reply