On July 20, the Shandong Coking Industry Association (SDCIA) together with 55 coking enterprises in the eastern Chinese province of Shandong launched a tender to purchase coking coal worldwide, attracting 12 foreign coal suppliers from Australia and Europe and 14 domestic coal producers. The SDCIA has not yet announced the result of the tender, but an SDCIA official disclosed that the tender price for the 5 million mt of coking coal which have been purchased is a long-term price and is about RMB 100/mt lower than the current market levels.
Some industry insiders have commented that the SDCIA is seeking to establish a long-term price mechanism for coking coal similar to that for iron ore imports, so as to stabilize coking coal supplies for Chinese coke producers. At present, small-sized coal mines in most regions in China have continued to suspend their operations while some medium-sized coal producers have also halted production, as they wait for mergers or restructurings according to the central government's plan for the reinvigoration of the domestic coal industry, thus contributing to the tight supply of coking coal in the domestic market. Meanwhile, with the current high operating rates in the coking industry, demand for coking coal has been expanding continuously, leading to increasing tension between supply and demand, and to the growing volume of coking coal imports into China.
Boosted by China's increasing import volume of coking coal, Australian coking coal offers have now risen to $145-155/mt CFR, almost equal to the domestic coking coal price. Thus, the price advantage of imported coking coal has been weakened.