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Dalian coke futures hit a fresh contract high on Tuesday, as producers of the steelmaking raw material in China reduced output capacities to support prices.
The most-traded January coke contract on China’s Dalian Commodity Exchange closed 1.8% higher at 2,171 yuan ($323.89) a tonne. The contract hit a record high of 2,175 yuan earlier in the session.
Dalian coke was on track for its sixth straight monthly gain, which along with higher iron ore prices, has squeezed steelmakers’ margins in the world’s top producer of the construction and manufacturing material.
Several Chinese coke producers have recently reduced capacities, and more are expected to follow suit, analysts at Sinosteel Futures Ltd said in a note.
“This will further aggravate the tight coke supply situation and support strong coke prices,” they said.
But weakening domestic demand for coke, the processed form of coking or metallurgical coal, should keep gains in check, they said.
Dalian coking coal slipped 0.1% to 1,348 yuan a tonne but was also on course to mark sixth straight months of gains, having hit a contract high last week.
China, the world’s top coal consumer, has reportedly recently informed key buyers to avoid coal from key supplier Australia, amid efforts to support domestic producers.
FUNDAMENTALS
* Dalian iron ore rose 0.2% to 768 yuan a tonne, after hitting a four-week low on Monday. Iron ore on the Singapore Exchange gained 0.8% to $113.45 a tonne at 0718 GMT.
* China’s Communist Party leaders are meeting behind closed doors until Oct. 29 to lay out the framework for the country’s 14th five-year economic plan, which will have a broad impact on an array of commodity markets through 2025.
* Construction steel rebar on the Shanghai Futures Exchange gained 0.1% while hot-rolled coil advanced 0.6%, but stainless steel slipped 1.4%.