Chinese coking coal set for best week in six on supply fears after mine accident

• The most-traded coking coal contract on the Dalian Commodity Exchange gained 10.1% for the week to 1,292 yuan ($190.57) per metric ton, while coke rose 9.6% to 1,906.5 yuan per ton
• A gas explosion at the Liushenyu mine last Friday killed 82 people, prompting stringent safety inspections and production suspensions at mines across coal-rich Shanxi province
• Steel production remains robust with average daily hot metal output reaching 2.41 million tons as of May 28, the highest level since October, supporting continued demand for coking coal and iron ore

Summary

Chinese coking coal prices are set for their strongest weekly performance in six weeks, driven by supply concerns following a deadly mine accident in Shanxi province. The most-traded coking coal contract on the Dalian Commodity Exchange gained 10.1% for the week, reaching 1,292 yuan ($190.57) per metric ton, while coke contracts rose 9.6% to 1,906.5 yuan per ton.

Key Developments:

A gas explosion at the Liushenyu mine last Friday killed 82 people, triggering widespread mine suspensions and stringent safety inspections across coal-rich Shanxi province. This created immediate supply concerns ahead of peak summer demand.

However, China's state planner partially offset market anxiety by pledging to ensure production and supply of primary energy sources, including coal and natural gas, to meet peak power generation needs during summer.

Market Dynamics:

Coking coal and coke prices found additional support from resilient steel sector demand. Average daily hot metal output—a key indicator of feedstock demand—rose 0.1% to 2.41 million tons as of May 28, the highest level since October.

Iron ore prices remained range-bound, with DCE contracts up 0.51% at 784 yuan per ton and Singapore benchmark contracts slightly lower at $105.15 per ton. Shanghai steel benchmarks showed modest gains across rebar (up 0.35%), hot-rolled coil (up 0.33%), and other products.

Implications:

The supply tightening from safety-related mine closures is supporting prices despite government efforts to maintain adequate energy supply, with market analysts highlighting the critical timing ahead of peak summer electricity demand.