Coking coal prices in China fell nearly 7 percent to a seven-month low on Wednesday, weighed down by prospects of higher supply and sustained weakness in demand for the steelmaking raw material, while fresh hopes of economic stimulus lifted iron ore futures.
The most-traded September coking coal contract on the Dalian Commodity Exchange slumped as much as 6.7 percent to hit 1,922 yuan ($284.95) a ton, its lowest level since Dec. 16.
Coke, the processed form of coking coal and used in iron ore smelting, shed 5 percent to 2,552.50 yuan a ton.
“Demand for raw materials has declined due to a reduction in steel mill production,” Sinosteel Futures analysts said in a note.
Top steel producer China aims to reduce output for a second consecutive year in line with its decarbonisation goals. Steel mills have also cut production more decisively due to weak demand as COVID-19 restrictions curbed economic activity and bad weather hampered construction projects.
An accumulation of coking coal supply at ports following recent COVID-19 curbs in Inner Mongolia, a key source of the material, is also adding pressure on prices, along with recent talks of China ending its unofficial ban on importing Australian coal.
“The market’s attention to Australian coal has increased recently,” Sinosteel analysts said.
“(But) it is still unclear whether Australian coal can resume customs clearance.”
Dalian iron ore’s benchmark September contract was up 1.8 percent, after Chinese Premier Li Keqiang said “painstaking” efforts were needed to stabilize the economy’s overall performance.
The steelmaking ingredient’s front-month August contract on the Singapore Exchange rose 2.8 percent to $99.95 a ton.
Rebar on the Shanghai Futures Exchange climbed 1.2 percent, hot-rolled coil rose 1.1 percent, and stainless steel gained 0.7 percent.
Iron ore was also supported after Brazilian miner Vale SA cut its 2022 iron ore production forecast.
