Downtrend continues in China's metallurgical coal market

As of June 6, China's metallurgical coal market has seen a nearly two-month price decline, with the all-China composite coking coal price assessed by Mysteel continuing to fall by another CNY5.7/mt ($0.8/mt) on the day to CNY979.5/mt (including 13% VAT).

This prolonged weakness has pushed coking coal prices closer to the record lows recorded in August 2020, and according to Mysteel, there are currently no clear signs that the market is likely to stabilize again.

Mysteel's latest survey shows that many blast furnace (BF) steel mills have planned equipment maintenance this week, with a total of 296,300 mt of affected output, up 7.1% from the previous week.

This suggests that most steel mills remain pessimistic about the steel market in the short term, as construction activity has slowed down due to hot and rainy weather in many parts of the country, especially in southern China, according to market sources.

The decline in hot pig iron output is expected to continue to limit the recovery of the coking coal market in the short term, according to a source. During the period from May 30 to June 5, the average daily hot pig iron output of 247 blast furnace steel mills surveyed by Mysteel continued to decline for the fourth consecutive week, down another 0.05% from the previous week to 2.42 million tonnes.

In addition, the persistent oversupply situation continues to be the main factor putting pressure on the coking coal market, as mine inventories continue to rise amid weak consumption, despite recent production cuts by mines. Sources said that high coking coal inventories at mines continued to weaken the bargaining power of miners in price negotiations, leading to continuous price cuts.

For example, some mines in Linfen City (Shanxi Province, North China) decided to cut the selling price of low-sulfur main coking coal (ash 10%, sulfur 0.5%, G index 70) by 30 yuan/t to 1,060 yuan/t (ex-works, VAT included), effective from June 7.

On June 6, the failure rate in coking coal auctions rose to 45.4% of total coal offered, up from 36% on Thursday, while trading volume also fell sharply by 50.5% on the day to 232,500 tonnes, according to Mysteel tracking data.

On the same day, the main price of Anze coking coal – a high-grade coking coal produced in Linfen City, Shanxi Province – remained unchanged at 1,180 yuan/ton (ex-works, VAT included) for five consecutive sessions.

Source: Mysteel