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Coking Coal Hits Two-Month High

Chinese steel futures rose for a third straight session on Wednesday, supported by leaner supply and expectations that consumption in the world’s top user would recover when production cuts are lifted after winter.

Prices of steelmaking raw materials iron ore and coking coal also advanced, with coking coal hitting a two-month peak.

Coking coal rose as high as 1,281.50 yuan a ton, its strongest level since Sept. 21, and was last up 3.9 percent at 1,264.50 yuan.

“I think there is some disruption that is causing some problems for the supply from Australia,” said Beijing-based CRU consultant Wang Di said.

Australia is the biggest supplier of coking coal to China. China’s overall coal imports dropped 21 percent in October from the previous month amid efforts by Beijing to replace coal with cleaner fuel in the northern part of the country to meet tough air quality targets.

But Di said she expects iron ore prices to remain under pressure with global supply expected to rise next year.

“There will be more shipments delivered to China in the coming months and inventory at ports are set to rise further,” Argonaut Securities analyst Helen Lau said in a note.

“As China steel mills have yet to restock anytime soon, therefore the iron ore price outlook remains grim in our view.”

Coking coal’s increase is great for Anglo Pacific Group plc (LON:APF) main asset, Kestrel. Kestrel is an underground coal mine located in the Bowen Basin, Queensland, Australia. It is operated by Rio Tinto plc (LON:RIO)). The Group owns 50% of certain sub-stratum lands which, under Queensland law, entitle it to coal royalty receipts from the Kestrel mine.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.