China coking coal, coke futures rise as supply concerns mount amid virus scare

reuters.com futures 2020-02-05 15:25:58

Coke and coking coal futures in China rose in early trade on February 5 as worries over supply of the steelmaking ingredients intensified due to the coronavirus epidemic that has restricted business activity and movement of people in the country.


The most-traded coke contract on the Dalian Commodity Exchange rose 1.2% to 1,788.50 yuan/t, adding to February 4's 0.3% gain.


The most-active Dalian coking coal contract was up 1.7% at 1,209 yuan/t, after advancing 0.6% on February 4.


"Due to the shortage of raw material supply, coke companies have stopped production in a wide range," analysts at SinoSteel Futures Co Ltd wrote in a note.


Coke stocks at steel mills and ports have fallen, pushing spot prices higher, they said.


The coronavirus epidemic, which has killed nearly 500 people in China and infected more than 24,000 so far, has also prevented factories from resuming operations after the Lunar New Year holiday that ended on February 2.


Spot prices of coking coal, the main raw material to produce coke, have also risen as some coal mines in China struggle to restart operations after the holiday, with many workers affected by travel curbs and other restrictions imposed to contain the epidemic.


On February 1, China National Energy Administration urged coal miners to resume production to keep the market supplied and stabilise prices amid the coronavirus outbreak.


The most-traded Dalian iron ore contract extended losses, but the downward pressure appeared easing. It was down 0.3% by noon break.


Spot iron ore prices also continued to fall, with the benchmark 62% iron-content grade settling at $81.80/t on February 4, the lowest since November 14 last year, data showed.


Despite the downward pressure on iron ore prices due to mounting concerns over the epidemic's impact on China's economy, Fitch Solutions revised upwards its 2020 iron ore price forecast to an average $85/t from $80 previously.


"While we expect the (iron ore) supply issues of 2019 to be largely resolved, strong demand from the steel industry in China as the government continues to stimulate the domestic construction industry in the face of a slowing economy, and more recently, the 2019 nCoV epidemic, will prevent prices from collapsing," Fitch Solutions said in a note.


The most-traded construction steel rebar contract on the Shanghai Futures Exchange was up 0.6%, while hot-rolled steel coil also advanced 0.6%.


Hyundai Motor plans to gradually suspend production at its South Korean factories from February 4, as a virus outbreak in China has disrupted supplies of vehicle components, a Hyundai Motor union official said.


(Writing by Tammy Yang  Editing by Harry Huo)
For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

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