Steel market fundamentals, in particular insufficient demand and the ongoing fall in steel prices, coupled with weak profits for steel mills, have continued to weigh on sentiments in the raw materials segment in China. In particular, today, June 17, coking coal and coke prices in the futures market inched down further. Specifically, at Dalian Commodity Exchange (DCE) coking coal futures prices have declined by RMB 32.5/mt during the day to RMB 2,576.5/mt ($384/mt). Likewise, coke futures prices have decreased by RMB 61.5/mt ($9/mt) on the same day to RMB 3,263/mt ($496/mt).
Although domestic coke prices in China have gained RMB 200/mt ($30/mt) compared to June 10, reaching RMB 3,360/mt ($501.5/mt) ex-warehouse, driven mostly by optimism that downstream demand may recover with the diminishing impact of Covid-related restrictions, the prices are exposed to a possible reversal in the very near future. In particular, a few steel mills in Tangshan have already decided to carry out maintenance of their blast furnaces. All the above has continued to encourage local traders to become more flexible during negotiations, with most of them providing discounts during sales.
With China-Australia ties having gained positive momentum recently, coking coal prices in China may weaken further. Moreover, this exerts a certain pressure on Australian suppliers. “If any positive changes in trade operations between Australia and China are seen, what will happen? The equivalent CFR China price to domestic coking coal is $380-400/mt, and so the market may drop again," a major Asia-based trader stated. Currently, premium coking coal, with ash not higher than 10.5 percent content in the local market in China is available at RMB 2,950/mt ($440.8/mt) ex-works, including 13 percent VAT. The latest deal for ex-Australia premium mid-volatility hard coking coal (HCCA), for July laycan, was done on June 17, at $375/mt FOB, down $7/mt from the levels targeted by suppliers.
Meanwhile, at the Singapore Exchange (SGX), coking coal prices for June contracts have declined further, down 1.87 percent from the previous levels to $376.5/mt.
$1 = RMB 6.70503