China coking coal futures hit upper limit on macro support, options launch expectations

China's coking coal futures hit their daily upper limit on Jan. 7, tracking gains across the ferrous complex as supportive macro signals, and expectations of increased institutional participation in Dalian Commodity Exchange lifted market sentiment, despite weak physical market fundamentals, market participants said.

During the day and noon trading session Jan. 7, DCE's most actively traded coking coal futures contract saw prices rising by Yuan 86/mt, or 7.98%, day over day to Yuan 1,164/mt, and capped by its daily increase limit. The May coke futures contract also settled at its daily upper limit, rising by Yuan 131/mt, or 7.98%, to Yuan 1,773/mt.

Market participants attributed the rally primarily to macro policy support after the People's Bank of China reiterated its commitment to maintaining a moderately loose monetary policy in 2026 at its annual work conference held Jan. 5-6. The guidance reinforced expectations of continued liquidity support, boosting risk appetite across commodity markets.

Sentiments were further supported by the Dalian Commodity Exchange's announcement that the exchange will launch coking coal options to be traded on Jan. 16. Market participants said the introduction of options is expected to attract institutional participation, improve hedging efficiency and enhance overall market liquidity.

"Market participants were seen reacting to the timing of the DCE's announcement on the launch of coking coal options to push prices higher, as resistance from short sellers eased at this stage," a China-based miner source said.

Some market participants also cited supply-side concerns as an additional factor behind the futures rally. Two Chinese trader sources said market discussions following a power-coal supply assurance meeting hosted by the Yulin city government in North China's Shaanxi province heightened sensitivity around potential coal supply discipline.

The futures rally was observed to have also lifted sentiments in the Chinese domestic physical coking coal markets, which led to more active trading discussions, sources said. However, a Chinese miner source said that overall, coking coal physical market fundamentals remained weak amid high coal inventories.

In the domestic coal auction on Jan. 7, premium coking coal with 12% ash from the Shaqu region in North China's Shanxi province was heard priced at Yuan 1,365-1,370/mt, down from around Yuan 1,420/mt at the previous auction on Dec. 24.

Buying interest in forward-delivery seaborne coking coal remained limited in China as end-users continued to watch near-term physical price direction. Platts premium Low-Vol (PLV) hard coking coal was assessed steady day over day at $205/mt CFR China.