China: Supply glut to pull down met coal prices in CY'25

• Domestic steel demand may fall 10 mnt y-o-y in 2025

  
  
  

• Poor profitability to affect Chinese coke, steel firms
  
  

Mysteel Global: Chinese metallurgical coal prices are expected to move lower in 2025, with the price bottom in the year likely to shed another 10% from that in 2024, according to Mysteel's latest forecast for the market for 2025. However, there might be some periodic upticks, driven by favourable macroeconomic policies.

The downward pressure on Chinese coking coal prices can be ascribed to a continued imbalance between the feed coal's supply and demand expected in 2025, featuring a growing trend where more coal stockpiles will be accumulated at upstream miners and traders rather than at end-users, like in the previous years.

Specifically, the report suggests that prices of Anze low-sulphur primary coking coal, a representative premium grade produced in Linfen city, in North China's Shanxi province, will possibly fall below RMB 1,400/tonne (t) ($191.8/t) at some point next year. Prices of this grade already notched a four-year low of RMB 1,500/t, on exw basis with VAT, on 26 December this year, according to Mysteel's assessment.

This trend of higher inventory pressures among coking coal suppliers has intensified in the second half of this year. Mysteel's nationwide survey of the 230 independent coke plants and the 247 steel mills - main consumers of coking coal - indicated that since early August this year, their combined stocks of coking coal have stayed below those piled at the country's 5 major ports, 110 wash plants and 523 coking coal mines - key coal supply hubs under Mysteel's monitoring.

The root cause for this shift was that Chinese coke and steel producers have shunned building high stocks of coking coal at their plants, due to the mounting challenges of staying profitable amid China's softening steel market.

For instance, the proportion of profitable mills among the 247 steel mills Mysteel tracks regularly averaged 36% from the year's start to 19 December, narrowing further from the annual average of 40.9% for 2023.

Consequently, the hot metal production at these 247 mills averaged 69.98 million tonnes (mnt) per month during January-November this year, lower by 4.03% than an average of 72.92 mnt in the same period last year.

In 2025, domestic demand for steel products is predicted to decline by 10 mnt compared to 2024, implying that poor profitability may continue to plague Chinese coke and steel firms and rein in their appetite for coking coal accordingly.

Though China's coking coal imports may moderate from this year's peak, large quantities of seaborne and Mongolian coal entering the country will cause persistent oversupply and fierce price competition between imported and domestic coal cargoes in 2025.

The report discloses that the Mongolian government targets to boost its exports of all types of coal to 83.3 mnt in 2025, a 6.8% rise from its goal for this year. Among the total, coking coal exports are expected to reach 65 mnt next year or 78% of the total target.

Meanwhile, Russia also plans to lift its coal exports to 100 mnt next year, with coking coal accounting for 54 mnt.

With robust inflows, prices of Mongolian coking coal, which accounts for the largest share of China's total imports of the commodity, will face more downward pressure next year. Mysteel's new report predicts that it is possible for prices of Mongolian 5# raw primary coking coal to fall below RMB 800/t in 2025, on ex-stock basis with VAT, at North China's Ganqimaodu border port.

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