CRU: Metallurgical Coal Prices See Further Gains on Constrained Chinese Supply

By Senior Coal Analyst Ben Carstein, from CRU’s Metallurgical Coal Market Outlook

Despite weakening fundamentals in the Chinese steel market, the seaborne metallurgical coal market, and hence prices, remain supported. Chinese HRC and rebar prices are up about RMB90 /t over the week. However, we believe this largely reflects trader purchases that have not been matched by underlying demand. This can be seen in rebar inventories held by traders, which have risen to 11 Mt, up 14 percent w/w. Meanwhile, finished steel inventories at Chinese steel mills are estimated to be almost 13 Mt, the highest on record and 5 Mt higher than the previous high of 8 Mt in February 2017. As a result, Chinese mills have started to cut production and finished steel production fell by a further 2 percent w/w to its lowest level since February 2017. With underlying demand recovering only gradually, CRU expects further cuts in steel production in the coming weeks.