China Coking Coal Jumps Daily Limit to $240 After Mine Explosion
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
coking-coalchina-commodities
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Coking coal futures traded on the Dalian Commodity Exchange surged by the exchange-imposed daily limit on Monday, 25 May 2026, following a fatal explosion at a Shanxi province coal mine. The most-active futures contract for September delivery jumped 8% to settle at 1,726 yuan per tonne ($240 USD). The blast, which occurred over the weekend, triggered immediate market fears of widespread supply disruptions. Analysts expect intensified safety inspections across China's vast coal mining sector, threatening near-term output in the world's largest coking coal producer.
Major coal mine disasters have historically precipitated severe supply shocks in China. Following a gas explosion at the Shimao coal mine in late 2023, nationwide safety inspections curtailed output for over three months. Coking coal prices rallied more than 40% during that period, peaking above $300 per tonne and significantly elevating global steelmaking costs. The current macro backdrop features strong demand from China's steel industry, which accounts for over 50% of global production.
Industrial output data for April showed a 6.2% year-over-year increase, signaling strong demand for steel inputs. The immediate catalyst is the weekend explosion at a major Shanxi mine, a province responsible for nearly 30% of China's total coal output. Provincial authorities have ordered an immediate investigation and mandated safety overhauls for all local mining operations. The event follows a recent directive from China's State Council emphasizing industrial safety, creating a heightened political environment for regulatory action.
The 25 May price move was the largest single-day gain for coking coal futures in eight months. The 8% rally to 1,726 yuan represents a year-to-date increase of 18% for the commodity. The price action sharply contrasts with the broader Bloomberg Commodity Index, which is down 2.1% for the year. Thermal coal, used primarily for power generation, saw a more muted response, rising only 2.3% on the same day.
| Metric | Pre-Blast (24 May Close) | Post-Blast (25 May Close) | Change |
|---|---|---|---|
| Dalian Coking Coal (Sept) | 1,598 yuan/tonne | 1,726 yuan/tonne | +128 yuan (+8.0%) |
| SGX Australia Coking Coal (Jul) | $228 USD/tonne | $235 USD/tonne | +$7 (+3.1%) |
Singapore-traded benchmark Australian coking coal futures rose 3.1% to $235 per tonne, reflecting expectations for increased import demand from Chinese steelmakers. The global seaborne coking coal market is approximately 300 million tonnes annually. China's domestic production exceeds 500 million tonnes, making any sustained domestic shortfall a significant driver of international prices.
The surge in coking coal prices directly pressures the operating margins of steel producers. Major integrated Chinese steelmakers like Baoshan Iron & Steel (600019.SS) and Angang Steel (000898.SZ) face immediate input cost inflation, potentially compressing earnings. Conversely, global mining giants with exposure to metallurgical coal, such as BHP Group (BHP) and Glencore (GLEN), stand to benefit from higher benchmark prices. Australian miners could see a 5-10% uplift in near-term earnings estimates if the price spike sustains.
A key counter-argument is that China maintains substantial coal inventory, estimated at over 200 million tonnes across key ports and utilities. This buffer could dampen the price impact if the safety inspection period is brief. Market positioning data from the Dalian exchange shows a sharp increase in open interest, indicating fresh speculative long positions entering the market. Institutional commodity trading advisors and macro hedge funds are likely building exposure, anticipating a prolonged supply squeeze.
Market participants will monitor the duration and geographic scope of safety inspections announced by the Shanxi provincial government, expected within the week. The next major data point is China's official Purchasing Managers' Index for May, scheduled for release on 31 May, which will indicate steel sector demand strength. Traders are watching the $245 per tonne level for Dalian futures, a technical resistance point not breached since November 2025.
A sustained break above $245 could target the 2025 high of $265. The key support level to watch is $225. The direction of Chinese steel rebar futures will signal whether end-demand can absorb the rising input costs, or if margin compression will force production cuts.
Global steel prices, particularly in Southeast Asia and Europe, are likely to rise as Chinese steel exports become more expensive. China is the world's largest steel exporter, accounting for roughly 15% of global trade. Higher domestic production costs for Chinese mills translate into higher offer prices for hot-rolled coil and other steel products on the international market. This can inflate construction and manufacturing costs globally.
Coking coal, or metallurgical coal, is a high-grade coal used exclusively in blast furnaces for steelmaking due to its carbon content and coking properties. Thermal coal is a lower-grade coal burned in power plants for electricity generation. While both are mined in Shanxi, the safety crackdown impacts all mining operations, but price sensitivity is higher for coking coal because of its specialized use and fewer immediate substitutes.
Yes. The 2023 Shimao mine disaster led to a price rally that lasted over a quarter and reshaped quarterly contract negotiations between Australian miners and Japanese steel mills, settling at a 15% premium. Long-term trends depend on the severity of the regulatory response. A multi-province inspection campaign could create a deficit that takes months to fill, supporting prices even after production resumes.
The Shanxi mine explosion has ignited a supply fear premium in coking coal markets that will pressure global steelmaker margins.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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