China: Coking coal miners extend CNY holidays amid persistent oversupply

• Miners see limited restocking by mills before CNY
  
  
• Tags fall 40.3% y-o-y in Jan, to lowest since May'21
  
  

Mysteel Global: As the Chinese New Year (CNY) holiday approaches, China's coking coal market will see reduced supply, as many mines are progressively halting operations and starting their holiday breaks well in advance of the official 28 January start. As the coal market contends with increasing inventory pressures, these shutdowns are seen as a necessary measure to balance supply and demand.

A Mysteel survey of 523 coking coal mines covering 64% of China's total production capacity found that as of 15 January, 454 mines had already determined their holiday schedules for the upcoming CNY period, which Mysteel calculated would trim output by about 20.05 million tonnes (mnt). Among the 454 mines, the duration of their CNY shutdowns ranged from two days to 48 days, with the average being 10.6 days. This is longer than the 9.1 days average during CNY last year.

In previous years, the reduction in coking coal supply before and during the Lunar New Year holiday break frequently caused prices to rebound after the market reopened and demand resumed. However, this may not happen in 2025, as the stubborn oversupply is less likely to be corrected by the holiday pause, sources warned.

In regions such as North China, particularly Shanxi province, the country's top coking coal producers have extended mine shutdowns to deal with mounting inventory pressure. According to the Mysteel survey, 242 coking coal mines in Shanxi, whose combined capacity accounts for 48.3% of China's total, have already scheduled holiday shutdowns. As many have purposely extended the holiday, the average shutdown duration of these 242 mines reached 12.9 days, with a notable rise in the number of mines announcing stoppages of more than 20 days.

However, the effect of these extended shutdowns could be limited in 2025. Usually ahead of the holiday closures of the mines, in a typical year, coke makers and steel companies will build their material reserves in the lead-up to the CNY holiday. Meanwhile, in contrast to the waves of buying that have pushed prices higher in previous years, 2025 has seen a weaker start, with curbed demand.

According to Mysteel's data, over the past few weeks, mines have transferred only limited volumes to end users from their inventories while, at the same time, continuing to reinforce their stocks. As of 10 January, inventories of washed coal at all 523 surveyed mines had increased by nearly 1.8 mnt to more than 4 mnt.

The price dynamics are equally telling. Coking coal prices, typically buoyed by pre-CNY restocking, have continued to slide so far this year, Mysteel noted.

As of 16 January, the national composite coking coal price under Mysteel's assessment stood at RMB 1,219.6/tonne (t) ($166.4/t), including 13% VAT, declining by a significant 40.3% y-o-y and marking the lowest since 8 May 2021. During the first 16 days of this month alone, the index fell by 4.2% on aggregate.

Looking ahead, the outlook for China's post-holiday coking coal market remains bearish. The consensus across the industry is that the oversupply situation will largely persist, considering the weakness of the steel market.

With the country beset by the long-standing property crisis and amid tightening environmental protection policies, China's crude steel production dipped 1.7% y-o-y to 1.005 billion tonnes (bnt) in 2024 to a five-year low, official statistics released on 17 January showed. Experts suggest that 2024 may prove to be the last year for annual output to stay above 1 bnt.

Meanwhile, though coking coal output will rise quickly once mines return to full production after CNY ends on 4 February, steel mills are expected to be slow in ramping up furnace activity. This will prolong the supply glut, keeping prices further in check. In fact, the coking coal market will likely continue to see downward price pressure well into the first quarter of 2025.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.