Chinese coking coal futures, which were supported by tighter supply amid Beijing's environmental clampdown, surged to 10-week high on Thursday. Shanghai steel rebar price edged up 0.8%. And iron ore futures, the fellow steelmaking commodity, were also rallied.
On the Dalian Commodity Exchange, the most-traded coking coal for January delivery surged as much as 5.5% to 1,332 RMB ($202) per tonne, its highest since Sept. 15.
Iron ore price followed coal futures higher. On the Dalian exchange, the most-traded May iron ore was last trading at 503.50 RMB, up 2.2%, marking a 10-week high of 510 RMB per tonne.
On the Shanghai Futures Exchange, rebar edged up 0.8% to 3,824 RMB per tonne.
Coke, used in steelmaking, closed up 1.7% at 1,988 RMB, while it initially touched a two-month peak of 2,032 RMB per tonne.
Iron ore for delivery to China's Qingdao port jumped 4.3% to $65.17 per tonne on Wednesday, its strongest level since Sept. 21.
As you may have known, China's government moves to replace coal with cleaner fuel in the northern part of the country to meet tough air quality targets. As one of the results, China's overall coal imports declined 21% in October from the previous month.
Domestic coking coal supply remains under pressure because "there are a lot of interruptions with the government implementing stricter environmental rules this winter", according to a Shanghai-based trader.
Coke is produced from coking coal. "Coking coal supply is still tight, that is why coking coal price and coke price are all rising," the trader said.
Steel production in northern China remains constrained by limits imposed by Beijing as part of its fight against smog, restrictions that are expected to be in place through March.
"Incentives to increase output are strong for these steel mills due to high margins. Iron ore port stocks show this behavior, with stockpiles in northern ports rising, while falling in southern ports," Commonwealth Bank of Australia analyst Vivek Dhar said in a note. ($1 = 6.5907 RMB)