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China's met coal market may soften in H2 CY'24

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Met Coke
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5 Jul 2024, 13:31 IST
China's met coal market may soften in H2 CY'24

China's market for metallurgical coal will likely see downward pressure gather gradually during this half of 2024 due to the weakening markets for steel and met coke, Mysteel predicted in its latest report on the commodity. During this month and next, the coking coal market may soften due to the seasonal lull for steel consumption, the report said, noting that this season's frequent heavy rains and extreme heat will disrupt work on building sites, impacting construction steel sales.

However, the months of September-October traditionally strong months for steel use as temperatures turn mild may see an uptick in domestic steel prices due to recovering activities at construction sites nationwide. But Mysteel also noted that the coking coal market could come under pressure in the year's closing months as steelmakers accelerate cuts in crude steel output to meet Beijing's directive to keep output this year on par with last year's.

Similarly, newly-commissioned coke production capacity this year could aggravate the capacity glut in the industry and dampen producers' profits, which may in turn see output reduced which would impact coking coal demand, the report cautioned.

It noted the findings of another Mysteel survey that suggest the remaining months of this year might see a substantial net increase of 14.02 million tonnes (mnt)/year in domestic met coke production capacity. January-May saw 5.2 mnt/year (y) of new coke-making capacity commissioned, as Mysteel Global reported.

The surplus coke capacity is seen undermining the profitability of domestic coke producers during this half, potentially capping their appetite for feed coal, a market watcher added. Conversely, the downward pressure of the weak demand for coking coal could be slightly eased by the reduced output at China's main mining hubs in H2, Mysteel's report suggested. It argued that ongoing mine safety checks by local and provincial government authorities could continue curbing mine output.

In the first half of this year, the daily average of processed coal at the 523 Chinese coking coal mines that Mysteel tracks nationwide slumped by 13.3% on year to 715,750 t/d. Daily washed coal output of these mines during 27 June-3 July dipped by 1% on week, as reported.

By the end of June, the national composite coking coal price under Mysteel's assessment came in at yuan 1,681.5/t ($231.2/t) including the 13% VAT, lower by a substantial yuan 453.6/t from the beginning of this year.

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

5 Jul 2024, 13:31 IST

 

 

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