- Market braces for weak post-holiday demand amid poor steel sales
- China’s coking coal stocks drop amid holiday-driven slowdown
Mysteel Global: China’s domestic coking coal demand experienced a sharp decline during 1-10 October, mainly as downstream users and traders paused their coal procurement over the eight-day National Day and Mid-Autumn Festival holidays that ended on 8 October.
Most end-buyers had completed replenishments of the feed coal towards late September, building abundant coal stocks for their consumption during the long break when supply and logistic services are usually disrupted by busy holiday traffic, sources told Mysteel.
After three consecutive weeks of increases, total coking coal inventories at the 230 independent coke plants that Mysteel tracks retreated by a marked 7.8% w-o-w to sit at 8.19 million tonnes (mnt) by 9 October due to consumption during the holiday.
Besides, more coke producers worried that metallurgical coke prices could lose upward momentum after the holiday or even turn downward if downstream steelmakers struggle to maintain profitability amid market weakness. This also dampened coke producers’ willingness to further build up their coal stocks, Mysteel learnt.
By 9 October, most coke plants still held coking coal stocks equivalent to 13-16 days of usage, but regional coal stocks in North China, including Shanxi, Inner Mongolia and Hebei, fell to 10.6 days of consumption, Mysteel’s data showed.
For steelmakers, Mysteel’s survey among the 247 blast-furnace steel mills showed that their combined coking coal stocks posted a smaller w-o-w fall of 0.9% to 7.81 mnt by 9 October. Notably, coal stocks at North China-based mills slipped below year-ago levels, equivalent to only 9.9 days of use.
The easing buying activity sent a bearish signal to market players, putting a hurdle on speculative purchases among coal traders and wash plants as well, and exerting some downward pressure on certain high-priced coal varieties.
As of 10 October, Mysteel’s assessment showed that national composite coking coal prices lost RMB 1.9/tonne ($0.3/t) from end-September to sit at RMB 1,251.7/t, including 13% VAT, while those for the leading brand Anze low-sulphur primary coking coal produced in Linfen city of Shanxi province plummeted by RMB 60/t to RMB 1,530/t.
Market sentiment for the week ahead still lacks clarity, with most participants weighing a potential supply squeeze against risks of weaker demand, market sources disclosed.
Concerns over a strained supply have intensified slightly after several coal mines in Northwest China’s Shaanxi province were ordered to suspend operations due to their violation during H1 this year in producing within 110% of their licensed capacities, although there are no clear signs of a broad impact of this inspection on coking coal supply so far. Besides, stricter safety checks by central authorities from November will likely dent miners’ enthusiasm for lifting operations.
Amid safety checks and holiday stoppages, raw coal production of the 523 Chinese coking coal mines during 2-8 October decreased by 5.3% from a week earlier to average 1.84 mnt/day, hitting a five-week low and 6.2% lower on a y-o-y basis, Mysteel’s survey data showed.
Another key variable is the attitude of steelmakers, which could steer demand changes from independent coke firms as well. Steel mills may push for lower feed coal prices once sluggish steel sales further squeeze their margins, or their possible output cuts — if more mills slip into losses — could directly lead to reduced demand for coking coal.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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