China’s coking coal prices soared more than 3 percent to hit a five-week peak on Friday, fuelled by tight supply concerns as a safety watchdog plans to carry out inspections at coal mines in northern China.
Some miners in major coal mining hubs of Shandong, Henan and regions in northeastern China have received notices from the National Coal Mine Safety Administration that have asked them to halt operation for inspections, the state-backed Shanghai Securities News (SSN) reported on Friday.
The inspections will last six months until June-end, according to a statement from the administration.
Analysts expect the disruption in production to affect 92.06 million tonnes in coal mining hubs, with coking coal and gas coal being the most affected.
The most-active coking coal futures on the Dalian Commodity Exchange rose 3.5 percent to 1,233 yuan ($182.91) a tonne, just shy of Friday’s high of 1,234 yuan, a level last seen on Dec. 7, 2018.
Coke prices climbed 2.2 percent to 1,982 yuan.
Chinese construction steel rebar futures clawed back some lost ground before the market closed at 0700 GMT.
Steel rebar inched up 0.4 percent to 3,539 yuan a tonne amid reports the United States and China were making headway in their talks on trade.
U.S. officials expect China’s top trade negotiator may visit Washington this month, signalling that higher-level discussions are likely to follow this week’s talks with mid-level officials in Beijing as the world’s two largest economies try to hammer out a deal to end a tit-for-tat tariff war.
However, investors remain largely cautious amid concerns about the state of the economy.
Stocks of steel products held by Chinese traders, an indicator of demand in the country, rose by 453,200 tonnes to 8.83 million tonnes, as of Jan. 11, data compiled by Mysteel Consultancy showed.
Traders typically replenish their stocks ahead of the Chinese new year break, due in early February this year, and sell them when downstream users go back to work after the week-long holiday.
Winter stocking has begun in some regions, but most traders are still on the sidelines, said analysts from Huatai Futures and CITIC Futures, adding that the restocking process has been slower than the previous year.
“Many people have learnt lessons from last year’s loss and don’t want to hoard too much this year … and there is still not enough direct stimulus from the central government to support steel demand,” said a steel trader in northeastern province of Liaoning.
Traders stocked up heavily before the new year holiday last year, but many lost money when demand turned to be weaker than expected, driving steel prices down nearly 20 percent within a month.
Weekly utilisation rates at steel mills across the country reached 64.36 percent this week, as of Jan.11, up 0.14 percentage points from previous week, data tracked by Mysteel showed.
The most-traded iron ore contract for May delivery on the Dalian Commodity Exchange edged 0.2 percent higher to 509 yuan a tonne.