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China's metallurgical coal supply to remain tight even as Mongolian truck traffic rises


Daily coal truck hauls at 500, up from 100

China's energy consumption curbs pressure domestic metallurgical coal demand

  • Author
  • Staff
  • Editor
  • Ankit Ajmera
  • Commodity
  • Coal Metals

China's metallurgical coal supply was expected to remain tight over the near term, even as the number of Mongolian trucks hauling coal into the country rose to 500 per day in the week ended Sept. 30, up from a more than one-year low of 100 trucks per day in the week to Sept. 17, sources said Oct. 1.

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Mongolian truck traffic into China hit a record of 2,233 trucks per day in August 2020, according to sources.

China is facing a severe shortage of metallurgical coal amid a historic rally in coking coal prices caused by a disruption in trade flows due to the COVID-19 pandemic and the government's unofficial ban on Australian coal since 2020.

Coking coal surpassed iron ore to become the most expensive input for steelmakers in September, Platts reported earlier.

The market was concerned if the volumes from Mongolia would keep up the momentum in the coming weeks, Beijing-based Founder CIFCO Futures said. Mongolia's truck traffic had slowed due to recurring COVID-19 cases in the region, according to sources. China imports coal from Mongolia through the largest land border port Ganqimaodu in Inner Mongolia.

China's stricter coronavirus-related checks at its borders and a bleak chance of Australian coal imports resuming in the near term were expected to keep the country's metallurgical coal supply tight and prices elevated, according to Founder CIFCO.

Prices of domestic coking coal surged 68.4% from early August to Yuan 4,235/mt ($655.90/mt) Sept. 29 for premium hard coking coal in the Shanxi province, S&P Global Platts data showed.

Meanwhile, the Platts iron ore benchmark IODEX 62% Fe dipped to a more than one-year low of $94/dry mt Sept. 20, down 48.7% from early August, and lower by about 60% from an all-time high of $233.1/dmt in May, according to Platts data.

Demand remains bleak

China's policy to curb energy consumption and carbon emissions have led to widespread steel output cuts, pressuring domestic metallurgical coal demand during the first two months of the fourth quarter, according to Fuzhou-based Changjiang Futures.

The country's major coal hub Shanxi province has capped downstream coking output due to the curbs on energy consumption and slowed buying from the downstream sector because of higher metallurgical coal prices, sources said.

High metallurgical coal prices amid poor demand weakened the sentiment in the domestic metallurgical coal auction market, with some auctions being called off, Shenzhen-based Chaos Ternary Futures said.

China's growing environmental controls on mines could also weigh on the domestic coal demand in the short term, Chinese industry analysts said.