Black: The foundation for coking coal's rise is unstable

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Source: COFCO Futures Research Center

Abstract

Recently, coking coal prices have broken upward, but the foundation for sustained increases is not solid. Three factors do not support the rise of coking coal: relatively strong supply stability, reasonable price levels, and poor downstream steelmaking profits.

1

Relatively Strong Supply Stability

In recent years, China’s total coking coal supply has increased, mainly driven by imports, while domestic production has remained basically stable. The sources of imports have significantly restructured, with a sharp increase in imports from Mongolia and a sharp decrease from Australia, leading to a reduced dependence on maritime transport for coking coal imports. The U.S. attack on Iran has pushed up maritime costs, but China’s core coking coal supply mainly consists of domestic coal and land-transported Mongolian coal, thus limiting the impact significantly.

Figure: China’s Coking Coal Supply
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

Note: Calculation Formula: Coking Coal Production = Coke Production * 1.3 - Coking Coal Import Volume

Figure: Coking Coal Import Sources (2015)
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

Figure: Coking Coal Import Sources (2025)
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

Figure: Coking Coal Import Sources (Australia)
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

Figure: Coking Coal Import Sources (Mongolia)
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

2

Reasonable Price Level

Coking coal prices are at a relatively reasonable level, with a certain premium compared to other coal types, making it difficult to flow significantly into the chemical sector. From a long-term perspective, since the supply-side reforms, the annual average price of the coking coal futures index has remained between 1200-1300, and after the sharp rebound from last year’s overselling, it has returned to this position. It is expected that the long-term downward trend since the 2021 peak has ended. If there are no major changes in supply, there is a high probability that prices will remain stable.

Figure: Coking Coal Futures Index
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

Figure: Coking Coal Spot and Futures Prices (Monthly Average)
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

3

Poor Downstream Steelmaking Profits

Domestic construction steel has seen a continuous significant decline, with steelmaking capacity remaining in excess, compressing steel prices and steelmaking profits to low levels. It is expected that this year’s steel prices and steelmaking profits are also unlikely to be optimistic, leaving little room for coking coal prices to rise significantly. Even if there is a short-term significant increase due to emotional factors, it will be difficult to maintain at high levels.

From the characteristics of the black industry chain, under the premise of stable steel price levels, the prices of iron ore and coking coal follow a pattern of mutual rise and fall. Further increases in coking coal prices require a decrease in iron ore prices to free up more space. This situation is unlikely in the short term.

Figure: Total Profits of Black Metal Smelting and Rolling Industries (Billion Yuan)
Data Source: Wind, Steel Union Data, COFCO Futures Research Institute

Author Profile

Liu Jialiang

Senior Researcher in Black Metals, COFCO Futures Research Institute

Trading Consultation Qualification Certificate No.: Z0013540

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Editor: Zhao Siyuan