[Black][Coking coal and coke] dual-fuel arbitrage has reached which stage? And how far has the raw material price transmission to steel products gone?

(Source: Commodity Intelligence and Trade)

On Monday, the coking coal futures market hit the daily limit up then oscillated and weakened, leading to a反套 (reverse hedge) logic with coke. Thermal coal surged significantly over the week, is the continuation of the daily consumption against the trend? Why does iron ore keep oscillating?

This week’s key points:

1. Double焦仓单 (double coke warehouse receipts) as reference points for the market

2. Focus on the fundamentals of coking coal

3. Focus on the fundamentals of coke

4. Focus on the fundamentals of thermal coal

5. Focus on the fundamentals of iron ore and steel

The spot price of coking coal continued to rise. Shanxi low-sulfur index closed at 1581 yuan, up 130 yuan week-on-week, up 28 yuan month-on-month, and up 326 yuan year-on-year; Shanxi high-sulfur index closed at 1324 yuan, up 70 yuan week-on-week, up 140 yuan month-on-month, and up 227 yuan year-on-year. Jinquan Meng 5 closed at 1315 yuan, up 75 yuan week-on-week, up 115 yuan month-on-month, and up 235 yuan year-on-year.

Coke’s first round of price increases, ports lead the rise. Rizhao Port准一级焦 (quasi-first-grade coke) closed at 1470 yuan for the week, up 50 yuan, unchanged month-on-month, and 90 yuan higher than last year; Lvliang准一级焦 closed at 1240 yuan, unchanged week-on-week, down 50 yuan month-on-month, and 80 yuan higher than last year.

Total social inventory of coking coal increased by 445k tons week-on-week, with stocks accumulating in all segments except mines. Mine inventory decreased by 386k tons, independent coking increased by 425k tons, coal washing plants increased by 236k tons, and steel plant coking increased by 85k tons. Port-side stocks slightly accumulated by 38k tons, with port inventory increasing by 49k tons compared to last week. Total coke inventory increased by 202k tons week-on-week, independent coking decreased by 42k tons, while all other segments saw increases; steel plant inventory rose by 35k tons, and port inventory increased by 209k tons.

Coking coal May contract surged on Monday then retreated after reducing positions, with weekly prices up 48 yuan. Opened at 1178 yuan, closed the week at 1219 yuan, with a weekly high of 1294 yuan and a low of 1171 yuan. Last Friday night trading and Monday saw significant position increases, with over 50k lots added during night trading, pushing prices up by over 100 points. As delivery approaches, the coking coal 05-09 contract remained weak, opening at -112 yuan, closing at -138 yuan, and touching a new low of -145 yuan during Friday night trading. Coke prices surged then retreated; the 05 contract opened at 1750 yuan, closed at 1752 yuan, with a weekly high of 1863 yuan. The coke futures market followed coking coal upward but retreated more sharply.

Iron ore futures continued to reduce positions and oscillate, still unable to break previous highs, with significant position reductions. The 05 contract opened at 814.5 yuan, closed at 812 yuan, with a weekly low of 801 yuan and a high of 831 yuan. The spread between the 05-09 contracts surged then fell back, with a maximum spread of 36.5 yuan and a minimum of 23 yuan.

Figure 1: Seasonal trend of main coking coal futures positions

This week’s focus

1. Double焦仓单 (double coke warehouse receipts) as reference points for the market

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