Cost Support for Coke Prices Strengthened amid Frequent Coal Mine Accidents

SHANGHAI, Aug 12 (SMM) - At present, the electricity consumption is still undergoing the peak season in China, and power plants have a strong demand for thermal coal. However, the frequent coal mine accidents recently have a negative impact on the supply of thermal coal, sending collateral effects to the coking coal market.

Since July, a total of 11 coal mine accidents have occurred, resulting in 25 deaths and 7 injuries. 8 out 11 coal mine accidents occurred in Shanxi, accounting for 72.7%. The coal mines involved in the accidents all halted the production for rectification, and the production resumption time is yet to be determined. The suspension of coal mines affected a production capacity of 20.7 million mt/year, tightening the supply of thermal coal. In addition, the local governments in Shanxi also imposed stricter inspection of security on the mines in the wake of the accidents. As Shanxi is home to a large number of coking coal producers, the inspection had an extensive impact on the supply of coking coal. The output of coking coal declined, and the shipment also slowed down. Overall, the supply of coking coal tightened. 

The coal mine accidents led to an increase in the thermal coal prices, while coking coal is a substitute for thermal coal. Therefore, the rising thermal coal prices also boost the coking coal prices. 

On the supply side, the supply of coking coal tightened due to the coal mine accidents, especially the supply in Shanxi. As a result, the online auctions saw more transactions at premiums. From August 5 to12, the prices of low-sulphur coking coal have risen by 100 yuan/mt, and there is still room for further growth.

To sum up, the rising coking coal prices strengthened the cost support for coke prices, which is expected to lift the coke prices further next week.