China coking coal prices extend gains after Shanxi mine disaster

Chinese coking coal futures pushed higher for a second session as investors watched for a broader government crackdown on the sector after a deadly accident at a mine in Shanxi province.

Prices in Dalian surged as much as 5.1% in early trading before paring most of the gains, after hitting the daily limit on Monday. Authorities in Shanxi have halted operations at 109 mines, which account for 122 million tons of annual capacity, according to to consultancy Mysteel. A fatal blast occurred at the privately owned Liushenyu mine on Friday night.

Most mines are subject to three-to-seven-day halts after severe incidents, and the market is watching to see if that scope will be expanded, as China nears the start of its annual mining safety campaign on June 1. If a sweeping crackdown by Beijing doesn’t eventuate, coal production will likely rapidly rebound after initial inspections, weighing on prices.

“Given the coal supply guarantee requirements ahead of summer, the central government has not further tightened work safety supervision,” said Yu Dian, a principle researcher at Citic Futures Co., based in Shanghai.

The blast, which killed at least 82 people, abruptly tightened China’s coking coal market, directly impacting about 4% of the country’s output. Some miners received higher offers for supply after the disaster, Mysteel said.

Coking coal futures were 0.5% higher at 1,273 yuan a ton as of 11:01 a.m. in Singapore. Iron ore on the Singapore Exchange fell 1.4% to $105.20. Dalian iron ore and Shanghai steel prices also retreated.

(By Katharine Gemmell)