Stop Australian coal imports, steel prices more than a point of support?

A piece of foreign media news today that China has stopped importing coal from Australia.The importance of coal as a fuel for steelmaking is self-evident. If the news is true, does it mean that the price of domestic coal will rise, affecting the trend of steel prices?Silver 10 steel prices have been bullish for several days, stop Australian coal imports can drive up steel prices?

China's state-owned energy companies and steel mills have been verbally told to stop importing coal from Australia, cutting the country's coal industry's exports to China by more than 90 billion yuan, Australia's Sydney Morning Herald reported.In May this year, China imposed some restrictions on coal imports from Australia in order to protect its own coal industry.

Coal, like iron ore, is an important black raw fuel, which plays an important role in steel production and is an important part of steel cost.Generally speaking, the cost of iron ore accounts for about 40-50% of the cost of steel, and the cost of coke accounts for about 20%-30% of the cost of steel.Since the end of March, steel prices continue to go up, including coke prices rose more than 200 yuan, the cost of steel mills increased about 100 yuan.For some time, coal prices have been rising, although some adverse to steel mill earnings, but the steel price rise has formed an important support.

As of October 13, the rise in both spot and futures, the spot, the ten key cities for the domestic tertiary rebar (Φ 25 mm) the average price is 3784 yuan/ton, rose from September 30, 80 yuan/ton, up 2.2%.Rebar futures rose slightly, 13 days to 3,628 yuan/ton, up 68 yuan than before the festival, up 1.9%, standing 3,600 yuan mark.

China is a major producer of coal. The total global coal output in 2019 was 8.129 billion tons, of which China's coal output was 3.846 billion tons, accounting for 47.3% of the global total.China imported 300 million tons of coal in 2019, up 6.3 percent year on year.But because of the huge demand, imports are still needed.

Australia is the country's biggest supplier of thermal coal, which accounts for 35 percent of the coal used in power generation, and exports of coking coal, used to make steel, surged 67 percent in the first half of this year as infrastructure accelerated.Data show that China's coal imports have been on the rise in recent years, reaching 280 million tons in 2018 and 310 million tons in 2019. From January to August this year, China imported 152 million tons of coal, of which 70.441,000 tons were imported from Australia, accounting for 46.4 percent.

China is rich in coal resources. In addition, China can expand its import share from Russia, Mongolia, Indonesia and other countries to supplement the resource gap.The import restriction of coal will form a certain resource gap, which will lead to a certain recovery of coal price.

But at present the crude steel production is higher, the inventory high still is the steel price rises the important resistance.According to data from China Iron and Steel Association, in the middle of September, key steel enterprises produced 21.4559 million tons of crude steel and 20.4522 million tons of steel, with an average daily output of 2.1456 million tons of crude steel, up 0.42% month-on-month and 1.94% year-on-year.Steel 2.0452 million tons, a year-on-year growth of 2.3%, 4.05%.In terms of inventory, as of October 10, the social inventory of 29 key cities according to the platform was 13.757 million tons, down 1.3% from the previous month and up 35.0% from the previous year.

In general, the supporting effect is limited because the proportion of coke in ton steel cost is small.Considering the current steel production and high inventory and other pressures, steel prices are still limited room to rise.