“The market has been in the doldrums for quite some time, but the shackles are off now,” Matthew Boyle of CRU Group told Bloomberg.com. The price of coking coal, used along with iron ore to make steel, has more than doubled to four-year highs around $205 a tonne since the beginning of July. That makes it 2016’s best-performing commodity.
In the past few years, there has been an oversupply amid slowing Chinese demand and efforts to cut pollution. But now China has started importing more because it is closing some unprofitable local mines in an effort to bolster the sector’s overall productivity. Chinese imports in the first seven months were up almost 12% year-on-year, notes FT.com.
Meanwhile, production difficulties at Australian mines have hampered supply. Indian imports have risen, while the steelmaking sector has looked robust of late, underpinning demand. But the surge seems to be a case of too much, too soon. BHP Billiton doesn’t expect the rally to last, while BCS Global Markets has dismissed it as “a bubble” inflated by supply squeezes unlikely to be sustained.