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Dalian coking coal rally loses steam; iron ore erases 2021 gains

China’s coking coal and coke futures swung between gains and losses on Wednesday following another blistering rally, after the market regulator announced an increase in transaction fees for actively-traded contracts.

China’s Dalian Commodity Exchange on Tuesday issued a notice on the increase in handling fees for October, November, December and January contracts, effective from Wednesday’s night trading.

The most-traded January coking coal DJMcv1 ended daytime trading 0.3% higher at 2,855 yuan ($441.78) a tonne, after a 15.7% advance over the last five sessions.

January coke DCJcv1 climbed 0.8% to 3,594 yuan a tonne, rising for the eighth session, but was off its record peak scaled on Tuesday.

Tight coking coal supply in China, which has banned coal from major producer Australia and is hit by weak output from local mines due to environmental and safety restrictions, has fuelled the rally in prices of the steelmaking ingredients.

Supply concerns intensified in the wake of COVID-19 restrictions that hampered coal shipments from Mongolia, with two more coronavirus cases involving drivers reportedly detected this week at Ganqimaodu Port in China’s Inner Mongolia region.

“Strong domestic coal demand and tighter supply in China should pave the way for more imports to replenish the inventories,” ANZ analysts said in a note.

But with the Australian coal ban, Chinese steelmakers will have to rely on other major suppliers such as Russia and the United States.

Dalian’s January iron ore DCIOcv1 edged up 0.1% to 747 yuan ($115.59) a tonne, but the steel input’s most-active October contract on the Singapore Exchange SZZFV1 shed 3.2% to $132.20 a tonne by 0726 GMT.

“While China’s ongoing capacity restrictions suggest steel production is slowing, we have to watch the (mills’) compliance level as the margins still remain attractive,” ANZ analysts said.

Rebar on the Shanghai Futures Exchange SRBcv1 dropped 0.9%, while both hot-rolled coil SHHCcv1 and stainless steel SHSScv1 slumped 1%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila)

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