Home / Commodities / Commodity News / China coke futures rise on supply concerns, iron ore extends selloff

China coke futures rise on supply concerns, iron ore extends selloff

Coke and coking coal futures in China rose on Wednesday as worries over supply of the steelmaking ingredients intensified due to the coronavirus epidemic that has disrupted businesses and restricted movement of people.

The most-traded coke contract on the Dalian Commodity Exchange closed 0.5% higher at 1,775 yuan a tonne, adding to Tuesday’s 0.3% gain.

The most-active Dalian coking coal contract rose 0.8% to 1,198.50 yuan a tonne, after advancing 0.6% on Tuesday.

“Due to the shortage of raw material supply, coke companies have stopped production in a wide range,” analysts at SinoSteel Futures Co Ltd wrote in a note.

Coke stocks at steel mills and ports have fallen, pushing spot prices higher, they said.

The coronavirus epidemic, which has killed nearly 500 people in China and infected more than 24,000, has prevented factories from resuming operations after the Lunar New Year holiday that ended on Sunday.

Spot prices of coking coal, the main raw material to produce coke, have risen as some coal mines in China struggle to restart operations after the holiday, with many workers affected by travel curbs and other restrictions imposed to contain the epidemic.

On Saturday, China National Energy Administration urged coal miners to resume production to keep the market supplied and stabilise prices.

FUNDAMENTALS
* The most-traded Dalian iron ore contract extended losses into a third session after the holiday, with a 1.5% drop.

* Spot iron ore prices fell further, with the benchmark 62% grade settling at $81.80 a tonne on Tuesday, the lowest since Nov. 14, based on data tracked by SteelHome consultancy.

* As port operations in China have been disrupted by the virus outbreak, iron ore port inventories are seen piling up in the near term, steel industry data provider MySteel reported.

* Despite the downward pressure on iron ore prices due to mounting concerns over the epidemic’s economic impact, Fitch Solutions raised its 2020 iron ore price forecast to an average $85 a tonne from $80.

* “While we expect the (iron ore) supply issues of 2019 to be largely resolved, strong demand from the steel industry in China as the government continues to stimulate the domestic construction industry in the face of a slowing economy, and more recently, the 2019 (virus) epidemic, will prevent prices from collapsing,” Fitch Solutions said.

* Construction steel rebar on the Shanghai Futures Exchange was up 0.4%, while hot-rolled steel coil advanced 0.5%.
Source: Reuters (Reporting by Enrico dela Cruz; Editing by Shounak Dasgupta and Subhranshu Sahu)

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