November 1, 2017 - Coking coal mine restarts in China are expected to pressure domestic prices lower, just as winter output restrictions accelerate falls in demand.
The reopening of some mines in Shanxi's Anze region today has prompted domestic price cuts of 50-150 yuan/t, with some low-sulphur premium hard coking coal varieties now being sold at Yn1,450-1,570/t ($218.15-236.20/t), depending on delivery costs.
China's domestic coking coal prices had been relatively stable since the end of summer. Increased safety inspections and mine shutdowns, aimed at preventing mining accidents during the communist party congress, are winding down.
Liulin low-sulphur brand produced by China's state-owned Shanxi Coking Coal is stable at around Yn1,500/t but prices for other mid- to high-sulphur varieties have fallen by Yn50-160/t over the past few weeks.
"Generally, prices of premium coking coal and coke varieties are stable because of their lower sulphur content, which means less pollution," a Chinese trader said. "Mid- to high-sulphur varieties are more polluting and so are under more pressure."
Weakness in Chinese coke markets have preceded the coal price falls. China's domestic coke markets are more exposed to spot trade and can be an indicator for coal price direction. Domestic metallurgical coke prices have fallen by Yn300-600/t since mid-September on lower demand and less stringent enforcement on output restrictions.
"In some regions, coke plants are required to extend coking times to 72 hours to reduce pollution, but because of poor enforcement, many coke plants are still producing at usual levels, which accelerated the price drop," a Chinese purchasing manager said.
Chinese futures for coking coal and coke fell today, counter to gains for steel and iron ore, with January met coke down by 3.5pc to Yn2,086/t and January coking coal down by 4pc to Yn1064/t from yesterday.
Many Chinese customers, especially large steel mills and coke plants are typically locked into long-term contracts with domestic producers, the same Chinese trader said. "So these price drops will mainly affect the procurement prices of smaller customers, who buy most of their cargoes on spot."
Shandong, a major coal producing region, announced that its mines have met coal capacity cut targets for the year. Five mines with a combined capacity of 3.51mn t were closed over the January-October period, the Shandong coal industry bureau said. This is part of a bigger push this year by the central government to reduce excess capacity in the coal sector by closing down inefficient mines.
Chinese imports are running at the fastest pace since 2013, as steel mills and trading firms take advantage of the lower seaborne prices this year. China's January-September imports at 53.2mn t are up by nearly 10mn t, or 22pc, from the same period in 2016. September imports at 6.03mn t rose by 7pc from August and 8.6pc on the year, as congestion and delays at south China ports and from Mongolia reduced throughput.