China coking coal hits more than 3-month high as supply worries mount

Metallurgical coal prices in top steel producer China rose on Tuesday to their highest in more than three months, shrugging off weakness in the broader ferrous market, as concerns grew over tightening supply.

Coal companies in Shanxi, China’s top coal producing province, plan to suspend production ahead of the ruling Communist Party congress beginning Oct. 16, traders said.

COVID-19 restrictions in Shanxi as China steps up efforts to contain outbreaks ahead of the crucial policymakers’ gathering, could tighten the steelmaking ingredient’s supply, they said.

Flood warnings in key coal supplier Australia also added to the supply concerns, analysts said.

“The supply side of coking coal will tighten again, which will provide strong support for coal prices,” Huatai Futures analysts said in a note.

The most-traded January coking coal on the Dalian Commodity Exchange DJMcv1 rose as much as 2.1% to 2,233 yuan ($310.60) a tonne, its strongest since June 30.

Dalian coke, however, shed 1.1%, after also touching its highest since June 30.

Dalian iron ore retreated from a two-month high, ending morning trade down 2.1% at 724 yuan a tonne, as traders opted to wait and see if there would be any policy changes from the congress involving China’s stringent COVID-19 curbs.

Benchmark November iron ore on the Singapore Exchange shed 2.4% to $94.60 a tonne.

In the spot market, benchmark 62%-grade iron ore bound for China has remained stable so far this month at $97 a tonne, SteelHome consultancy data showed, after a 21% drop in the third quarter.

China’s firm demand for iron ore may extend in October, while domestic supply will remain steady, according to a monthly report from Mysteel consultancy.

Steel prices also pulled back, with rebar on the Shanghai Futures Exchange SRBcv1 down 1% and hot-rolled coil SHHCcv1 falling 1.8%. Stainless steel SHSScv1 dropped 1.1%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Subhranshu Sahu)