Coking coal prices fell to 1,273 CNY/tonne due to weakening steel demand in China.
Coking coal prices in China fell 1.16% on May 27th as concerns about weakening steel demand outweighed risks of supply disruptions from a mining accident.
On May 27th, coking coal prices in the Chinese market recorded a significant decline. Concerns about slowing downstream steel demand overshadowed supply uncertainties, despite the market being impacted by a serious mining accident in Shanxi province.
Raw material price movements on the exchanges.
The most actively traded coking coal contract on the Dalian Commodity Exchange (DCE) closed the day down 1.16% at 1,273.00 yuan/tonne (equivalent to $187.65/tonne). Similarly, the coke contract also recorded a 1.08% decline, closing at 1,877.50 yuan/tonne.
Regarding iron ore, market movements were mixed. On the DCE exchange, iron ore futures contracts fell 0.32% to 781.50 CNY/tonne. However, in the Singapore market, the benchmark iron ore contract for June delivery rose slightly by 0.17%, to 105.20 USD/tonne.
Steel demand is weakening due to seasonal factors.
The main reason for the decline in steelmaking raw material prices is the slowdown in consumption in southern China. Prolonged heavy rains have disrupted logistics and slowed down construction projects. According to data from the China Iron and Steel Association (CISA), average daily crude steel output during the period of May 11–20 is expected to decrease by 0.9% compared to the first 10 days of the month.
Ge Xin, an analyst at consulting firm Lange Steel, commented: "The steel market is entering a seasonal slowdown in June." Furthermore, profit margins for steel mills are shrinking significantly due to persistently high input costs while actual demand remains weak.
Statistics on fluctuations in steel products.
| Item | Exchange | Variation (%) |
|---|---|---|
| Coke | DCE | -1.16% |
| Coke | DCE | -1.08% |
| Rebar | Shanghai | -0.73% |
| Hot-rolled steel coils | Shanghai | -0.50% |
| Wire | Shanghai | -1.09% |
| stainless steel | Shanghai | +0.81% |
Pressure from international trade barriers
In addition to domestic factors, the Chinese steel industry is also facing numerous challenges from the international market. The increase in global trade barriers, along with pressure from carbon taxes and fierce competition from foreign rivals, has directly impacted steel exports.
Although raw material prices surged earlier this week due to stricter safety inspections following a coal mine gas explosion that killed 82 people, analysts from Everbright Futures believe that demand pressure will remain the deciding factor in short-term price trends. Overall, the steelmaking raw materials market will continue to face pressure as it enters a low consumption cycle.
