MNI: China Coal Prices Face Further Downward Pressure
MNI (BEIJING) - Short-term coking coal futures could fall below CNY1,000 a tonne, extending their 3.66% fall this month to CNY1,093, should next week’s Two Sessions meeting fail to deliver policy stimulus that meets market expectations, local analysts told MNI, noting supply remained high.
“The market has partly priced in the expected policies, with the relatively flat price curve on coking coal futures reflecting a cautious outlook,” a futures analyst told MNI, forecasting a CNY1,150 ceiling for May contracts on the Dalian Commodity Exchange unless policy announcements on March 5 exceed expectations to boost steel and coke demand.
The U.S. administration’s China tariffs to date have been less intense than anticipated, which will lessen Beijing’s need to provide large stimulus next week, the analyst said.
The market could rise initially amid the Two Sessions before falling should support underwhelm or demand fail to improve, said Zhou Yi, an analyst at Hubei-based commodity service provider Hua’s Logistics.
“Positivity from an anticipated 5% growth target and increasing real-estate financing support have already been priced in,” Zhou noted, adding that a boost to sentiment will be short-lived and not enough to reverse coal-market weakness given supply-demand fundamentals.
Prices will remain subdued as China ramps up domestic-mine output and increases imports amid already high inventory and weak local demand, he said.
Falling steel exports, particularly to Vietnam and South Korea due to anti-dumping tariffs, will also increase domestic steel supply and further suppress prices and profits, he continued, noting those countries alone accounted for 11.5% and 7.4% of outbound sales in 2024.
The futures analyst also warned steel mills may delay production restarts following the Spring Festival, as rising iron-ore prices continue to squeeze profits, which will weigh on iron production.
THERMAL COAL
China’s largest state-owned coal mining firm Shenhua Energy has reportedly suspended coal imports from April, but this will have little impact on prices overall given high inventories, Zhou said, noting thermal coal prices will continue to fall until summer when power plants replenish stocks. However, the rising proportion of solar, hydro and wind-power generation is increasingly moderating demand, he warned.
The benchmark price of 5,500 kcal thermal coal at Qinhuangdao port fell to CNY738 per tonne on Feb 21, declining 17% m/m and hitting its lowest level since April 2021, according to data by China Coal Transportation and Distribution Association.
Zhou expected thermal coal to fluctuate around CNY800-900 a tonne this year, lower than his previous CNY850-900 estimate due to recent weakness. (See MNI: China Coal Prices To Fall Further In 2025 - Analysts)