Coking coal prices in China fall amid oversupply

Spot coking coal quotations in China (EXW, Anze) decreased by $2.6/t to $170.72/t between May 16 and 23, according to Kallanish. This situation was caused by negative market sentiment and rising stocks.

According to Bloomberg, the decline in demand for steel in China is spreading to neighboring markets, with prices for coking coal and coke falling to their lowest level since 2016. As of May 29, coking coal futures quotes on the Dalian Stock Exchange stood at 765 yuan per ton ($106.2).

The situation on the coal market is further deteriorating due to an increase in supply and a likely further decline in prices. According to the China Coal Transportation and Distribution Association, coke plants in the main coal center of Shanxi have been operating at 83% of capacity over the past week and have shown no intention of curbing the oversupply.

Prices for seaborne coking coal remained almost unchanged during May 16-23, as market sentiment was negative due to increased supply. As of May 23, according to Kallanish, the FOB Australia price was $193.76/t ($193.88/t on May 16).

Market sources report that prices for Australian coking coal for end users in Southeast Asia are too high for non-Indian markets, with Chinese traders offering more competitive terms. In addition, the mining concern Glencore offers and has already sold premium coal to the region at a more attractive fixed price.

At the end of last week, the United States added coking coal to the list of critical materials. The rationale for this decision is that a sharp increase in domestic coking coal production and use is needed to achieve the country’s political goal of dominating steel production.

At the same time, low demand for steel in the United States, which has increased amid uncertainty about global trade policy, S&P Global notes, has had a strong impact on metallurgical coal companies. This forces the sector to keep a close eye on costs in anticipation of an improvement in the market.

In the first half of May, coking coal prices in China fell to $175 per tonne. Australian premium coking coal prices rose by $5/t to $200/t FOB from April 25 to May 9. The increased demand was driven by Indian coke plants. They are building up stocks ahead of the monsoon season.