- Stability likely in early-Oct due to controlled stockpiles at miners
- Weak steel sales, rising coal supply may pressure tags later in Oct
Mysteel Global: China’s coking coal market is expected to stabilise first but lose steam later in October, mainly weighed down by the struggling downstream steel and coke sectors, while policy uncertainty is also a key variable shaping the market trend, according to Mysteel’s new report on the commodity.
A tight supply-demand balance will continue to support the coking coal market early this month, with stock accumulation at mines still controllable given mines’ recent fulfilment of existing pre-sale orders and their cautious approach in lifting operations, the report says.
Despite signs of rising coking coal stockpiles across the country lately, Mysteel’s survey found that increases were mainly seen in stocks of imported cargoes and at the consumer’s end, while inventories at mines remained relatively low. This fundamental pattern may help the market stabilise in the near term.
For example, raw and washed coal stocks at the 523 Chinese coking coal mines under Mysteel’s tracking totalled 6.42 million tonnes (mnt) by 8 October, presenting a 4% fall compared with the average level in October last year.
Additionally, steel mills are expected to maintain steady hot metal production in the coming weeks, which will provide some support for coking coal tags as well, at least preventing a broad price collapse, though small-scale downward corrections for some coal varieties are likely.
However, a turning point may emerge later this month, as miners could face mounting inventory pressure if downstream steel mills and coke producers adopt a prudent attitude about coal purchases amid their shrinking profit margins.
Finished steel stockpiles in the country have kept rising lately, posing more downward pressure on steel prices and further eroding mills’ profitability. The lacklustre steel market also indicates slim chances for a second round of coke price hikes following the first bout materialised on 1 October, charting a gloomy picture for coking coal demand.
More risks will emerge if steelmakers plan to cut production this month amid poor steel sales and high costs, meaning that coking coal prices could tumble due to a marked reduction in demand.
On the supply end, if Chinese authorities do not take stringent measures against coal overproduction activity in October, it is highly likely that domestic coking coal production will recover slowly, adding downward risks for coal prices later this month. Otherwise, the market may manage to stay afloat with restrictive moves extending this tight fundamental balance, says Xiong Chao, chief analyst at Mysteel.
The country’s simmering anti-involution policy has rebuilt some confidence among coal traders and encouraged their speculative purchases in the past couple of months, which has helped relieve some inventory pressure at miners and is expected to keep cushioning price fluctuations. Survey respondents predict that coking coal prices may not fall back significantly in October.
As of 30 September, Mysteel’s assessment of the national composite coking coal price came in at RMB 1,253.6/tonne (t) ($176/t), including 13% VAT, rising by RMB 57.2/t from a month ago. The assessment for the leading brand Anze low-sulphur primary coking coal in North China’s Shanxi province spiked by RMB 120/t m-o-m to RMB 1,590/t on the same day.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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