(Recasts, adds comments from steel mills, coking plants)
By Meng Meng and Josephine Mason
BEIJING Feb 20 China's steel mills and traders
were scrambling to find alternative supplies of coking coal for
steel making on Monday after Beijing slapped a surprise ban on
coal imports from its isolated northern neighbour.
Chinese prices of steel, coking coal and coke all rallied,
as traders and analysts said mills will likely be forced to buy
more expensive domestic material or seek alternatives further
afield from Russia or Australia, driving up costs.
While North Korea accounts for only a small portion of
China's total coal imports, it is the main foreign supplier of
high-quality thermal coal, called anthracite, which is used to
make coke, a key ingredient in steelmaking.
"This news really took us by surprise. We are looking at a
couple of alternative plans," said a steel mill purchasing
manager, based in the northern province of Liaoning.
These included buying anthracite from Shanxi province or
buying more coke from local providers, but both were more
costly, said the manager, whose firm uses about 10,000 tonnes of
North Korean anthracite each month.
Business with North Korea had become increasingly difficult
under years of sanctions and the once-bustling trade handling
coal from the north had shrunk to just a few private merchants.
Still few mills or traders anticipated the complete
suspension of imports, which came a week after Pyongyang tested
an intermediate-range ballistic missile, its first direct
challenge to the international community since U.S. President
Donald Trump took office on Jan. 20.
China bought 22.48 million tonnes of anthracite from North
Korea in 2016, 85 percent of its total imports.
Steel mills often blend anthracite with coking coal to make
coke, a fuel used in blast furnaces, rather than using only more
expensive coking coal.
China's most-active futures contract for rebar, a
steel product used in construction, rose 2.6 percent by 0640 GMT
on Monday, while coke and coking coal added
2.6 percent and 2.4 percent respectively.
Shares in Chinese anthracite producer Yangquan Coal Industry
rose 2.8 percent.
"Rebar jumped on anticipation that the ban on North Korean
anthracite could lead to higher costs for steel mills that will
struggle to find cheaper alternatives in the domestic market,"
said Zhang Min, a coal analyst based in Zibo, Shandong with
Sublime Information Group.
A coke producer said he expected to ban to lead to a rebound
in coke prices, which had fallen since late December due to good
supply and reduced demand for the Lunar New Year.
"I am not planning to take any new orders from new clients
right now, because we believe coke powder prices will rebound
sharply this week on the news," said the manager of a domestic
coke plant, based in Shandong province.
Some mills could seek other imports, but producers such as
Australia, Russia and Vietnam didn't produce enough to pick up
the slack and shipping it would cost significantly more than
from North Korea, traders said.
($1 = 6.8640 Chinese yuan renminbi)
(Reporting by Josephine Mason and Meng Meng; Editing by Richard