Tanking China coking coal market gets respite after output halts

Chinese coking coal futures have staged a rare recovery this month, with the latest gains driven by temporary halts to production in the mining hub of Shanxi as regulators conduct environmental assessments.

Inspections in the Linfen area of the province have intensified, and mines delivering about 10.5 million tons a year were verbally notified on Monday to suspend operations, according to industry publication SXCoal. Some miners have reported that the stoppages are provisionally scheduled to last 10 days.

That’s helped lift prices of the steelmaking fuel on the Dalian exchange to 791.5 yuan ($110) a ton, a 9% gain for the month so far. Futures had hit a nine-year low of 709 yuan at the start of June, less than half of their value a year ago.

Inspections, whether for safety or environmental reasons, are a feature of China’s mining industry that often crimp supply and boost prices. But the respite this time round should be brief. Miners have been busy in recent years and the country is sitting on a glut of coal, while customers in the steel industry are likely to burn even less as government-mandated output cuts take hold.

“Sufficient supply, high inventory levels, and weak demand should continue to put downward pressure on coking coal prices in the near term,” Morgan Stanley analysts including Rachel Zhang said in a note on Tuesday.

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