Exclusive from Qingdao Mysteel Conference: Steel Weak, Coal Wild: Where the Smart Money Plays Next

📊 Executive Report – Met Coal & Coke Market Outlook

China’s GDP grew 5.3% in H1 2025, but fixed-asset investment slowed to +1.6%, with real estate down -12% YoY, remaining the key drag.
Exports outperformed expectations (+7.3% YoY Jan–Jul), but global headwinds persist as IMF cut 2025 global GDP forecast to 2.8% and WTO expects global trade contraction (-0.2%).

Steel demand is “乍暖还寒” (flickering warmth, unstable) with weak profitability despite high production.
Domestic inventories remain elevated; prices are volatile but largely in decline since 2024, only finding temporary rebounds mid-2025.
Tariff shocks (U.S. raising Section 232 tariffs to 50%) have worsened global demand sentiment.

Coking coal: 2025 saw a sharp first-half fall (Anze LV -260 RMB/t), followed by a Q3 rebound (+300 RMB/t). Net change: +40 RMB/t YTD.
Coke: Still negative YTD (down ~170 RMB/t) despite partial recovery.
Inventories: Coking coal stocks dropped nearly 10 Mt in Jan–Aug, mainly in the trade sector (-7.7 Mt). Coke stocks remain relatively low, with steel mills holding modest buffers.
Imports: Mongolia flows recovering in Q3, full-year still expected at 51–53 Mt, below early expectations.

China has ~550 Mt coke capacity; 2025 net expansion continues (+10 Mt capacity expected). “Involution” (excess competition) persists.
Environmental policy: By 2025 year-end, 60% of capacity in key regions must complete ultra-low emission upgrades.

Coal-Coke Volatility: The cycle remains highly policy- and supply-driven. The 2025 Q1–Q2 slump was caused by overproduction, passive destocking, and weak downstream demand, while the Q3 rebound reflected anti-involution policy push, steel mill restocking, and reduced mine output.
Steel-Coke Linkage: Since 2017, steel prices have been in long-term decline, oscillating around 4,000 RMB/t averages. Coke margins followed steel’s volatility, but profit squeeze intensified post-2022.
Coke Industry Consolidation: Independent cokeries (70% of capacity) dominate but face higher costs vs integrated mills. Management and cost gaps explain 200 RMB/t profitability spreads.
Global Demand Shifts: Chinese exports cushioned domestic oversupply, but trade wars and tariffs (2024–2025) created external shocks that pulled down both steel and raw materials.

China: Growth pressure persists; stimulus (monetary easing, infrastructure support) expected in H2 2025–2026.
Global: Tariff-driven trade fragmentation will continue; IMF and WTO both see lower trade and GDP growth into 2026.

H2 2025: Prices to stay range-bound, with demand capped by real estate and exports. Limited upside unless stronger policy support materializes.
2026: Possible stabilization if domestic construction cycles bottom out and export markets (India, ASEAN) absorb more Chinese steel.

Supply: Coal mines face slow resumption; outages and policy restrictions create fragility in supply recovery.
Imports: Mongolia expected to remain the largest incremental supplier; logistics constraints remain decisive.
Coke capacity: Net additions in 2025–2026 mean continued competition pressure; survival depends on cost efficiency and environmental compliance.

Now (H2 2025): Expect short squeezes and rebound rallies driven by policy tightening (anti-involution, inspections) but capped by weak demand.
Past Lessons: Cyclical rallies often fade quickly without real demand (steel restocking or export orders).
Future Positioning:
- Traders should position for short-term volatility trades, especially around policy headlines, capacity shutdowns, and Mongolian border flows.
- Longer-term, focus shifts to quality spreads (LV vs MV coking coal, coke CSR-driven premiums) as China formalizes new standards.
- Steel’s structural downtrend implies coal-coke profitability will hinge more on supply discipline than demand growth.

NOW: Coal rebounded, coke lagging, steel still weak. Market driven by supply cuts and policy noise.
PAST: Repeated cycles of overcapacity and policy interventions; traders who captured volatility thrived.
FUTURE: Expect high volatility, structural headwinds on demand, and growing importance of policy compliance, environmental upgrades, and regional spreads.