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Coking Coal and Coke Sink to Lowest Levels Since 2016 Amid Steel Demand Weakness
China’s deepening steel demand slump is sending shockwaves through related raw material markets. Prices of coking coal and coke—both essential inputs in blast furnace steelmaking—have plunged to their lowest levels since 2016, with further declines anticipated as production curtailments intensify.
Steelmakers across China are under pressure to cut output, responding to sluggish domestic consumption and weakening overseas demand. The lingering collapse of China’s property sector—the largest consumer of rebar steel—remains the key structural drag. While exports have temporarily absorbed some surplus capacity, rising trade protectionism threatens to close that escape valve.
Steel rebar futures in Shanghai, a bellwether for construction activity, fell to near eight-year lows this week. Meanwhile, Dalian-traded iron ore has dropped 10% in 2025 to date, reflecting bearish sentiment across the ferrous complex.
Oversupply Adds Fuel to the Fire
On the coal front, prices are under dual pressure: falling demand from steel mills and a glut of supply. According to Chao Yuke of the China Coal Transportation and Distribution Association, miners are producing coal at near-record levels, especially in the thermal segment, but coking coal is not far behind.
Although high-grade coking coal remains scarcer than thermal coal in China, imports have supplemented domestic supply significantly. This has allowed coke conversion plants—especially in the coal-rich province of Shanxi—to maintain elevated operations. Data shows these plants operated at 83% of capacity over the past week, with no signs of voluntary shutdowns to ease the oversupply.
Outlook and Implications
With real estate stagnating and policy signals pointing to a cap on steel output for environmental reasons, further downside risk remains for both coke and coking coal markets. Prices could continue to weaken if output discipline doesn’t match the pace of demand erosion.
ScrapInsight Commentary
Falling coking coal and coke prices may offer short-term relief to integrated steelmakers, but they also reflect a fragile steel demand base. For scrap suppliers, this development could depress demand from EAF mills that compete on input costs with blast furnaces—especially if weak steel prices persist. Additionally, should coking coal imports fall amid oversupply, some Asian buyers may pivot to more competitively priced scrap as an alternative iron source. Watch for temporary price support in regional scrap markets, but expect volatility tied to Chinese steel policy and global trade tensions.
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