October 8, 2018 / 8:41 AM / in a month

UPDATE 1-Chinese coking coal, coke prices surge on concerns over tight supply

* Handan city to enforce winter cuts from Nov to March 2019

* Coking coal prices for long-term contracts rose -trader

* Steel stockpiles may continue to rise -analysts (Recasts, adds trader’s comment, updates prices)

By Muyu Xu and Dominique Patton

BEIJING, Oct 8 (Reuters) - The price of steelmaking raw material coking coal jumped nearly 6 percent in China on Monday and coke rose more than 4 percent, buoyed by worries over tighter supply amid longer production curbs as investors returned after a week-long public holiday.

The city of Handan in the smog-prone Hebei province issued a draft winter output reduction plan during the holiday, saying restrictions on heavy industries will run from Nov. 1 to March 31, 2019. That would be a month longer than the previous winter.

The most-active January coking coal contract on the Dalian Commodity Exchange climbed as much as 5.9 percent to 1,332 yuan ($193), its strongest level since Aug. 23.

January coke futures rose 4.2 percent to settle at 2,331.50 yuan a tonne.

The price rally was also driven by concerns over limited supply in major coal hub Shanxi province which has extended its non-heating season production curbs.

China’s environmental ministry’s warned in late September that heavy industrial companies must not flout the nation’s tough emission rules despite Beijing’s move to allow provinces to set their own output restrictions.

“The price hike in the spot market also supported futures, with coking coal prices for long-term contracts rising 70-100 yuan a tonne at some producers,” said a Shandong-based trader.

Rebar steel on the Shanghai Futures Exchange closed up 0.7 percent at 3,971 yuan a tonne, recovering from early losses. Hot-rolled coil gained 1.2 percent to 3,891 yuan.

However, analysts warned of increasing steel inventory, as “steel demand during national holiday was flat, which indicates stockpiles are likely to continue rising and add pressure to steel prices,” brokerage Orient Futures said in a note.

Steel stockpiles held by Chinese traders were at 10 million tonnes on Sept. 28, up from 9.85 million tonnes in the prior week, latest available data from Mysteel consultancy showed.

The Purchasing Managers’ Index (PMI) for the steel sector, an indicator showing industrial operations, fell 1.4 percentage points to 52 percent in September amid declining new orders at steel mills, data from the China Federation of Logistics & Purchasing (CFLP) showed on Monday.

“Steel mills still have very strong incentives to ramp up production amid good weather condition and high steel prices. However, increasing steel prices crimped purchasing intention from downstream sectors,” CFLP said in a statement.

Dalian iron ore futures rose 1 percent to 498 yuan a tonne.

$1 = 6.9136 Chinese yuan Reporting by Muyu Xu and Dominique Patton; Editing by Amrutha Gayathri and Manolo Serapio Jr.

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