China: Weekly coal and coke market highlights
Chinese domestic metallurgical coke prices remain supported amid tight supply and firm demand.
CoalMint assessed the latest price for met coke with 12.5% ash in North China at CNY 2,130/t ($324.5/t FOB China), up CNY 20/t ($11.3/t) on the week.
Meanwhile coal importers in China have turned away from the seaborne market following the widespread rumor on the country's possible ban on Australian coal imports.
China's import halt of Australian coking coal erode steelmaking margins
With China's steel production running at record levels, steelmakers have been obliged to seek alternative coking coal supply, after Australian coal sales to China came under an informal ban.
While steel mills in China turned to countries such as Mongolia, Russia and Canada to source premium hard coking coal. However, the spot availability of alternative origins is low, forcing Chinese steelmakers to use more expensive domestic coking coals, thereby eroding their profit margins.
Alternative seaborne origins such as Canada, the US, Mozambique, Russia and Mongolia are mostly overbooked, or in short supply. Besides, it takes long time to ship coal from the Americas to northern China, which would result in late arrivals for Chinese buyers seeking spot cargoes to cover immediate restocking needs.
Furthermore, spot availability of coking coal from Russia and Mozambique is reportedly tight at present.
Chinese domestic met coke prices continue uptrend on coking coal shortage
In consideration of the restrictions on Australian coal imports, many Chinese steel mills have expressed concerns that met coke prices would increase due to shortage of coking coal supply, thereby squeezing steel margins.
Coking coal supply tightness, coupled with de-capacity and replacement measures, have already pushed up the country's met coke export prices to such high levels which are incompetent against other exporting nations.
Chinese steel mills fear that coke producers might propose another round of price hike in the near term, even after the fifth round of uptick by CNY 50/t has been largely accepted by steelmakers in Hebei and Shandong.
Although steel mills might have less bargaining power amid supply tightness, some traders anticipate that poor steel margins and uncertainty surrounding downstream sales might exert downward pressure on domestic met coke prices in China.
However, increasing steel production capacity in Southeast Asia is expected to support coke demand, while limited supply would support imported coke prices.