Last month, both coke firms and steelmakers lifted their production in response to consistently positive profit margins, leading to increased consumption of the feed coal material.
On the supply side, the growth in domestic output of coking coal was still stifled by strict safety inspections on mining operations mounted by authorities in North China’s Shanxi province. Mysteel’s weekly tracking of 523 Chinese coking coal mines showed that they produced 756,500 tonnes/day over May 23-29, up by 1.2% on month but still lower by 11.3% on year.
Nonetheless, coking coal supplies in China were ample overall, with imports supplementing domestic sources. For example, average daily throughput of coal cargoes via the Ganqimaodu land port in North China’s Inner Mongolia, the largest gateway for Mongolian coal exports to China, rose by 21.3% from April and by a more substantial 74.2% on year to reach 153,500 tonnes/day in May. Mongolia is China’s top coking coal supplier, Mysteel Global noted.
With no clear conflict looming between supply and demand last month, Chinese met coal prices were mainly under the sway of market sentiment that saw ups and downs, the report pointed out.
When independent coke firms proposed lifting their met coke prices earlier last month, the optimism in the market drove up met coal prices. But the sentiment was later dampened by the steelmakers’ silent rejection and led prices to decline as a result.
Not until the central government unveiled favourable policies to revive the housing market around mid-May did the market mood brighten again, the report notes. Eventually, by May 31 the national composite coking coal price under Mysteel’s assessment had risen by RMB 14.5/tonne ($2/t) from end-April to reach RMB 1,732/t.
Going forward, the supply-demand balance in the met coal market is likely to persist in June, the report predicted. Many coking coal mines are poised to resume production soon, sources said, but a significant rebound in coking coal output is still unlikely as strict safety checks will remain in place, especially when June is a designated month for safe production.
Meanwhile, demand for coking coal will also plateau as Mysteel anticipates that daily hot metal output among the 247 Chinese steel mills it monitors will range between 2.36 and 2.37 million tonnes/day this month, largely flat from the current throughput.
Stable supply and demand will contribute to keep met coal market fundamentals solid but the impact from the low season should not be overlooked, the report warned. “Should steel prices soften due to waning steel demand, coking coal prices will also be weighed down slightly, a market analyst based in Shanghai said.
Note: This article has been published under an article exchange agreement between BigMint and MySteel.