Coke, coking coal hit 4-mth lows as winter sell-off continues

31 October 2017

Chinese coke and coking coal futures fell to four-month lows on Tuesday as investors continued to pile up bearish bets and exit long positions ahead of the month-end, worried about the impact that curbs on steel production would have on winter demand.

Data showing that China’s steel industry grew at its slowest in six months also hammered sentiment for steelmaking raw materials.

The most-traded coke contract on the Dalian Commodity Exchange fell 2.6 percent to 1,676.5 yuan ($253.01) a tonne by midday break. In early trade, the contract hit 1,656.5 yuan a tonne, down more than 3.7 percent and its lowest level since June 28.

The contract is on course for a drop of more than 11 percent in October, which would be its second straight monthly fall after crashing 18.7 percent in September.

“Coke prices fell because of the growing intensity of production curbs on steel mills,” sid Zhao Xiaobo, an analyst with Sinosteel Futures in Beijing.

Rigorous restrictions on steel output are expected in November as manufacturers in 28 cities in northern China have been asked to stagger production to reduce pollutant emissions.

Demand for coke is fading, causing spot prices to fall sharply and dragging futures down as well, Zhao said.

Among other steelmaking raw materials, Dalian’s most-traded coking coal futures contract for January delivery fell 3.5 percent to 1,069 yuan a tonne, after earlier hitting 1,058.5 yuan, down nearly 4.5 percent and their weakest since end-June. The coking coal futures were on track for a 2.5 percent drop over the month.

Iron ore futures, meanwhile, were down 0.8 percent at 424.50 yuan a tonne and on course for a fifth straight day of losses, as well as a 6 percent decline in October. On Monday, the contract touched 421 yuan a tonne, its lowest since June 27.

Data from consultancy Steelhome showed that stockpiles of iron ore at Chinese ports had climbed 2.7 percent since Oct. 20 to 135.8 million tonnes on Oct. 30.

“The recent measures to restrict (steel) production in the central regions of the country are likely to have reduced producers’ desire to restock their (iron ore) holdings, leading to an increase at the ports,” ANZ bank said in a research note.

The most-traded steel rebar futures on the Shanghai Futures Exchange was up 0.4 percent to 3,604 yuan a tonne by the midday break and set for a flat performance for October.