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Dalian coking coal, coke retreat after record rally

Chinese coking coal and coke futures fell on Friday, pulling back from record highs scaled a session earlier, although the steelmaking ingredients were set for more than 10% weekly gains.

Coking coal DJMcv1 on China’s Dalian Commodity Exchange ended daytime trading 1.8% lower at 2,523 yuan ($389.25) a tonne after a seven-session rally. Coke DCJcv1 shed 2.8% to 3,164.50 yuan a tonne following a four-day advance.

Their most-active January contracts, however, were up 11.2% for coking coal and 10.5% for coke this week.

Friday’s pullback comes after reports Chinese authorities would closely monitor market activities and punish speculators.

“(Coking coal) supply issues in China and Mongolia as well as an import ban on Australian coal are factors driving up prices to ridiculous levels,” said Erik Hedborg, an iron ore analyst at commodities consultancy CRU.

Coke, the processed form of coking coal, is a reducing agent in melting iron ore, the key steelmaking ingredient. Among iron ore products, lump is more coke-intensive than pellets and fines.

Top steel producer China’s demand for iron ore lump in particular has collapsed due to higher coal and coke prices, Hedborg said.

Analysts said coking coal supply concerns in China grew this week with the closure of border with Mongolia, amid weak output from local mines due to environmental campaigns and safety checks.

“Chinese steelmakers have no option but to look to Russia, Canada and the U.S. as the next-best option to source their coking coal,” said Julien Hall, regional metals pricing director at S&P Global Platts.

Dalian iron ore for January delivery DCIOcv1 fell 1.4% to 840 yuan a tonne, but was up 9.3% for the week following five straight weekly losses. Iron ore September contract on the Singapore Exchange SZZFN1 was 2.1% higher at $156.45 a tonne by 0742 GMT.

Rebar on the Shanghai Futures Exchange SRBcv1 gained 0.1%, while hot-rolled coil SHHCcv1 slipped 0.6%. Stainless steel SHSScv1 dropped 0.9%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Additional reporting by Muyu Xu in Beijing; Editing by Subhranshu Sahu and Uttaresh.V)

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