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UPDATE 2-China coking coal climbs more than 8 pct after Cyclone Debbie disrupts shipments
April 5, 2017 / 3:43 AM / in 7 months

UPDATE 2-China coking coal climbs more than 8 pct after Cyclone Debbie disrupts shipments

* Dalian coking coal rises to more than 4-month high

* Australian coking coal futures in Singapore up 43 pct

* BHP declares force majeure on coal deliveries

* China reopens after 2-day public holiday (Adds ANZ comment, updates prices)

By Manolo Serapio Jr

MANILA, April 5 (Reuters) - Chinese coking coal futures jumped more than 8 percent to four-month highs on Wednesday amid worries over tighter supply after Cyclone Debbie slammed into top supplier Australia, crippling exports of the steelmaking raw material.

The spike in Chinese prices followed a 43 percent surge in Singapore-listed futures of Australian premium coking coal over the past two days. China’s financial markets were shut on Monday and Tuesday for public holidays.

Coking coal for May delivery on the Dalian Commodity Exchange closed up 8.5 percent at 1,376.50 yuan ($200) a tonne, after having climbed as high as 1,383 yuan, its loftiest since Nov. 30.

A critical mountain pass on the railway connecting Australia’s biggest coking coal mines to ports has been hit by landslides and buckled tracks caused by Cyclone Debbie, forcing some producers, including top exporter BHP Billiton, to declare force majeure on coal cargoes.

The line’s operator, Aurizon Holdings, said it would take around five weeks to finish repairs and that alternative routes would be considered.

ANZ Bank commodity strategist Daniel Hynes said about 13 million tonnes of coking coal from Australia will be lost due to the disruption. That would be equal to just over a fifth of China’s total imports of the raw material, which reached 59 million tonnes in 2016.

“While coal producers have learnt their lesson from the devastating floods in 2011, they will struggle to recover any of the lost production,” Hynes wrote in a report.

RUSSIA, MONGOLIA

Chinese steel mills may source coking coal supplies from Russia and Mongolia with the stoppage in Australian exports, traders said.

Market sources on Tuesday said the United States could also be an option. Still, the distance and time involved in shipping from there to China might complicate matters, a Shanghai-based trader said on Wednesday.

It takes at least 30 to 40 days for U.S. cargoes to reach China, he said.

“It may be better for mills to find a substitute supplier in China. China has good coal resources and should be able to meet demand,” the trader said.

China may not have a lot of coking coal in stock because quality of the raw material is affected if stored for a long period, he added.

The disruption in Australian shipments may increase the negotiating power of coking coal miners in second-quarter term contract dealings with Japanese steelmakers, Argonaut Securities analyst Helen Lau said, who earlier saw the price being settled at around $160 per tonne.

Australian premium coking coal futures on the Singapore Exchange stood at $225 a tonne on Tuesday.

The strength in coking coal spread to other ferrous commodities, although some pared gains towards the close.

Dalian coke closed 4.8 percent higher at 1,982 yuan a tonne, after peaking at 1,999 yuan earlier, its strongest since May 2012.

The most-active rebar on the Shanghai Futures Exchange rose 1.8 percent to 3,222 yuan a tonne. Dalian iron ore advanced 0.6 percent to 559.50 yuan per tonne. ($1 = 6.8909 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Kenneth Maxwell)

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