Coking coal slide to 5-month lows after mills seek lower prices

Chinese coking coal futures fell nearly 4% to five-month lows on Monday after steel mills sought lower prices for a second time this month, exacerbating bearish sentiment in the fragile ferrous market. Steel mills in northern China’s Tangshan city plan to lower their purchase price of coke by between 50 yuan ($7.27) and 100 yuan a tonne from April 10, said analysts at consultancy Mysteel on Monday.

That follows a reduction of 100 yuan in coke prices last week. The pricing proposal is expected to be followed by mills elsewhere, they added.

The most-traded May coking coal futures contract on the Dalian Commodity Exchange (DCE) ended Monday daytime trading 3.66% lower at 1,696.5 yuan a tonne. Coke fell 1.93% to 2,490.5 yuan a tonne, also a five-month low.

Abundant supply and subdued demand has put coking coal and coke markets under pressure. “Fundamentals of the (coking coal and coke) market are very weak, and prices had been supported by expectation of a pick-up in steel demand,” said a ferrous market analyst at a Shanghai-based securities firm who declined to be identified as he is not authorized to speak to media.

“When the actual (steel) demand showed signs of being weaker than expected, it is no surprise to see the prices slump,” he added. Dalian and Singapore iron ore futures were weak on Monday due to lower-than-expected steel demand and higher ore shipments.

The most-traded September iron ore futures contract on the DCE was 1.83% lower at a two week-low at 777 yuan a tonne. On the Singapore Exchange, the benchmark May iron ore was 0.56% lower at $116.85 a tonne as of 0704 GMT, its lowest since March 23.

Weakness in the raw materials markets permeated into the downstream steel market. Rebar on the Shanghai Futures Exchange declined by 1.91% to 3,907 yuan a tonne, hot-rolled coil shed 1.45%, and stainless steel dipped 0.07%. But wire rod edged up 0.47%.