China’s coking coal futures prices hit the upper trading limit for the second consecutive session on Tuesday amid market speculation that the Chinese government may conduct inspections in major coal-producing regions, potentially disrupting supply.
The most-traded coking coal contract on the Dalian Commodity Exchange surged nearly 8% to 1,048.5 yuan ($146.19) per ton, reaching its highest level since March 19. Coking coal, typically used to produce coke for steelmaking, saw its counterpart coke futures (DCJcv1) also hit the upper limit.
Simon Wu, a senior consultant at Wood Mackenzie, noted that a document allegedly from the National Energy Administration (NEA) called for inspections of coal mines in eight provinces to identify potential overcapacity production, driving the price surge. “This could reduce effective market supply,” he said. Reuters could not verify the authenticity of the NEA inspection order circulating in a Henan provincial government document on social media. When calling a phone number listed in the document, the respondent stated they were following NEA instructions and requested no further calls. The NEA did not immediately respond to Reuters’ request for comment.
Prices also hit the upper limit on Monday after Beijing announced the start of construction on the world’s largest hydropower station in Tibet, raising expectations of increased demand. Analysts from consultancy Lange Steel noted in a Monday report that the mega-project is expected to generate 3.5 to 6 million tons of steel demand.
Coking coal prices have risen 28% since July, following Chinese President Xi Jinping’s inspection of Shanxi, the country’s largest coal-producing region, earlier this month, sparking speculation about new supply-side reforms.
Source: Reuters
