Chinese coking coal futures are going nuts, jumping 10% to the highest level on record

Photo: ChinaFotoPress via Getty Images

Chinese coking coal futures exploded higher on Monday, surging 10%, the maximum daily amount allowed based on market rules, meaning the only thing preventing further gains is that they’re not permitted.

The January 2017 contract on the Dalian Commodities Exchange is currently up 9.83% at 1,514 yuan, just shy of all-time record high of 1,516 yuan which was struck earlier in the session.

Dalian Coking Coal Futures Jan 2017. Source: Thomson Reuters Eikon.

The strength in coking coal prices also helped to lift coke futures with the January 2017 contract in Dalian currently sitting up 6.95%, the highest level since early 2013.

According to Reuters, the renewed rally comes amid tight supply in China, with Helen Lau, an analyst at Argonaut Securities in Hong Kong, stating that inventory of coking coal among major Chinese steel companies has dropped to just nine days, the lowest levels on record.

“The market remains very tight. At the same time overall steel demand is good supported by infrastructure, so mills are able to pass on the higher cost of raw material,” said Lau.

The enormous rally in coking coal and coke futures has helped to lift other commodity futures traded in China.

Rebar futures on the Shanghai Futures Exchange have rallied by 4.84%, supported by news that Tangshan, a major steel producing city in Northern China, has introduced fresh measures to limit steel production amid heavy pollution in the region, including the capital Beijing.

“Reportedly all steel mills in the city are required to shut down their sinter furnaces and bank furnaces until further notice,” said analysts at The Steel Index over the weekend.

Even iron ore futures, not subject to tight supply like some other bulk commodities in the nation, is rallying, adding a further 0.99% to sit at 508.5 yuan.

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