China’s coking coal and coke market outlook was moderately shored up along with an expectation of a rebound in steel demand, which was backed by the strongest policy support on real estate and the country’s new stance to relax the control of the epidemic.
On November 14, the most-traded coking coal contract on China’s Dalian Commodity Exchange rose as much as 1.56%, to 2,122.5 yuan/t in the morning trade, and the most-active coke contract on the bourse ended at 2,705.5 yuan/t, up 2.13%.
Coke prices had declined by totaling 300-330 yuan/t since late October, due to weak demand from steel mills that had limited production in response to lukewarm consumption in the downstream sectors, especially the construction sector. Weak coke prices had resulted in continued losses and low production enthusiasm, which also dragged down demand and prices for coking coal.
However, the downtrend is likely to temporarily halt as mills are regaining confidence in production following a fresh series of policy packages by Chinese regulators on the struggling real estate sector, a key part of the construction industry, which consumes one-third of the country’s total steel.
The People’s Bank of China and the China Banking and Insurance Regulatory Commission have published 16 steps to support the real estate industry, including increasing the liquidity of cash-strapped property developers and loosening the down payment requirement for first-home buyers.
The policies are seen as the strongest rescue plans to the sector and are believed to effectively end the crisis.
China’s steel demand had been strongly hit by the real estate crisis, after debt-plagued developers significantly slowed down or suspended some of their construction projects.
Thin construction steel had resulted in a supply surplus in the market, pressing down steel prices to a level over 20% lower compared with the preceding year and forcing mills to limit production to ease losses even in the typical peak demand month in October.
Construction activities have speeded up in some construction sites, driving up demand for steel, Sxcoal learned. Although the emerging zest would still face downside pressure in northern regions in winter, steelmakers’ confidence was supported with expectation of a stronger spike of demand after the winter.
Besides, China has taken steps to loosen the control over COVID-19 epidemic, including shortening quarantines by two days for close contacts of infected people and inbound travelers, stopping trying to identify “secondary” contacts domestically while still identifying close contacts and stopping trying to identify the medium risk area while still doing controls on high-risk areas.
On November 14, the most-active rebar contract on the Shanghai Futures Exchange ended 3,648.0 yuan/t, up 1.25%.
In the spot market, coking coal prices tended to be stabilizing on November 14, although both upward and downward revisions were still heard in the market.
In Wuhai of Inner Mongolia, low-sulfur fat coal (S 0.8%, A 12%) was traded at 1,750 yuan/t and mid-sulfur fat coal (S 1.8%, A12%) was 1,650 yuan/t, steady week on week.
Coke prices remained steady after the third round of price cuts last week and several producers were increasingly reluctant to sell out stocks with expectation of higher bids.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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