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China coking coal futures leap on demand optimism

Chinese coking coal futures surged more than 13% on Wednesday, boosted by improving sentiment in the property market and expectations of higher steelmaking demand at mills, although analysts are flagging risks on weak fundamentals.

Financial regulators have told some banks to issue more loans to property firms for project development, in efforts to marginally ease liquidity strains across the industry, according to sources.

“The ferrous sector is now repairing losses from the previous period on signs of easing stress in the real estate market,” said Cheng Peng, an analyst with SinoSteel Futures.

Meanwhile, the industry expects increase in steel production in the coming months after curbing its output more than what authorities required, which could benefit demand for raw materials, Cheng also said.

The most-traded coking coal futures on the Dalian Commodity Exchange DJMcv1, for January delivery, powered as much as 13.5% to 2,170 yuan ($339.71) per tonne. They ended up 12.4% at 2,149 yuan a tonne.

Coke futures on the Dalian bourse DCJcv1 jumped 4.8% to 3,050 yuan per tonne at close.

Benchmark iron ore futures DCIOcv1 extended gains after hitting a 10% daily trading limit on Tuesday and were up 5.8% to 617 yuan a tonne when market closed.

Still, analysts are wary of fluctuations in the market.

“Government’s efforts in ensuring coal supplies have brought fundamental impact on its supply and demand,” analysts with Huatai Futures wrote in a note, adding that liquidity for coking coal and coke are insufficient now.

Spot prices of iron ore with 62% iron content for delivery to China SH-CCN-IRNOR62 gained $2 to $97.5 a tonne on Tuesday, data from SteelHome consultancy showed.

Construction rebar on the Shanghai Futures Exchange SRBcv1 rose 3.2% to 4,502 yuan a tonne.

Hot-rolled coils SHHCcv1 increased 3.2% to 4,599 yuan per tonne and stainless steel futures SHSScv1 were up 3.6% to 18,145 yuan a tonne.
Source: Reuters (Reporting by Min Zhang in Beijing and Enrico Dela Cruz in Manila; editing by Uttaresh.V)

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