BEIJING: Chinese coking coal futures surged more than 8% on Wednesday, boosted by improving sentiment in the property market and expectations of higher steelmaking demand at mills, although analysts are flagging risks on weak fundamentals.
Financial regulators have told some banks to issue more loans to property firms for project development, in efforts to marginally ease liquidity strains across the industry, according to sources.
“The ferrous sector is now repairing losses from the previous period on signs of easing stress in the real estate market,” said Cheng Peng, an analyst with SinoSteel Futures.
Meanwhile, the industry expects increase in steel production in the coming months after curbing its output more than what authorities required, which could benefit demand for raw materials, Cheng also said.
The most-traded coking coal futures on the Dalian Commodity Exchange, for January delivery, powered as much as 8.6% to 2,077 yuan ($325.04) per tonne. They were up 7.1% to 2,048 yuan a tonne as of 0155 GMT.
Coke futures on the Dalian bourse jumped 2.2% to 2,974 yuan per tonne. Benchmark iron ore futures extended gains after hitting a 10% daily trading limit on Tuesday and were up 2.1% to 595 yuan a tonne.
Still, analysts are wary of fluctuations in the market.
“Government’s efforts in ensuring coal supplies have brought fundamental impact on its supply and demand,” analysts with Huatai Futures wrote in a note, adding that liquidity for coking coal and coke are insufficient now.
Spot prices of iron ore with 62% iron content for delivery to China gained $2 to $97.5 a tonne on Tuesday, data from SteelHome consultancy showed.
Construction rebar on the Shanghai Futures Exchange rose 1.7% to 4,437 yuan a tonne. Hot-rolled coils increased 2% to 4,549 yuan per tonne and stainless steel futures were up 2.2% to 17,890 yuan a tonne.