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China coke, coking coal break losing streak as investors hunt bargains
September 26, 2017 / 4:12 AM / 3 months ago

China coke, coking coal break losing streak as investors hunt bargains

* Iron ore, coking cole, coke prices all rise

* Coke, coking coal entered bear market territory on Monday

* Steel mills offer discounts, spurring demand

BEIJING, Sept 26 (Reuters) - China’s steel and steelmaking raw materials recovered some ground on Tuesday, with coke breaking an eight-day losing streak, as investors scooped up bargains and others closed out bearish positions ahead of the quarter-end and Chinese holiday.

The coking coal and coke markets both entered bear territory on Monday, having fallen 20 percent over the past month, after investors exited bullish long positions and placed new bearish bets amid concerns about falling demand over winter.

Tough restrictions on heavy manufacturing during the colder winter months in the north of the country are expected to curb demand for key steelmaking raw materials.

Very little has changed in the fundamental outlook for the market, said Richard Lu, a steel consultant at CRU in Beijing, but steel mills have started offering bargain prices, spurring some physical demand and supporting prices.

Some end-of-quarter window dressing had also helped support prices ahead of the week-long Chinese national holiday from Oct. 1.

“In terms of the futures market, it’s more about a correction,” Lu said.

The most-active coke futures for delivery in January were up 1.1 percent at 2,030 yuan ($306.88) a tonne at 0354 GMT, bouncing back from a near-two-month low hit on Monday. The market last week notched up its biggest weekly loss since May.

The most-active coking coal futures contract on the Dalian Commodity Exchange was up 0.3 percent in early trade to 1,182 yuan, after a 3.2 percent fall a day earlier.

On Monday, open interest, a measure of liquidity in a market, jumped by 36,000 lots to 356,790 lots, the highest since Aug. 21, as investors scrambled to open new bearish bets. Coke open interest also rose.

Some major industrial centres appear to be taking action ahead of the winter heating season due to a current bout of smog.

The key steelmaking hub of Tangshan said it would impose temporary restrictions on pelletizing and sintering production from Sep. 25 to tackle poor air quality in Hebei province. The pellet and sinter plants can only run at 50 percent of their utilization rates.

“It is a temporary production restriction, but we may see more similar supply curtailments before the implementation of the (official winter) policy,” said He Ming, a steel analyst at Wood Mackenzie in Beijing.

The most-traded construction steel futures contract on the Shanghai Futures Exchange was up 1.6 percent at 3,640 yuan.

Iron ore for January delivery on the Dalian Exchange was up 0.9 percent at 470.5 yuan a tonne.

$1 = 6.6140 Chinese yuan renminbi Reporting by Tom Daly; Editing by Richard Pullin

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