Key Takeaways
Coking coal futures on the Dalian Commodity Exchange jumped 7.97 percent to 1,266.5 yuan ($186.76) per metric ton after a fatal mine explosion in Shanxi province killed 82 workers and prompted fears of a supply crunch.
The price surge hit the daily upper limit allowed on the exchange, according to data from the Dalian Commodity Exchange. The accident is the country's deadliest in the coal sector in at least 17 years, Reuters reported.
The gas explosion occurred Friday at the privately owned Liushenyu mine, which primarily produces coking coal used in steelmaking. In response, regional authorities have launched extensive safety inspections targeting risks from gas, water, and structural integrity at other mines, according to the Shanxi Daily.
The crackdown on safety threatens to disrupt output from a region critical to China's energy security, a key priority for President Xi Jinping. The incident puts Beijing's drive for resource self-sufficiency in direct conflict with its mandate to prevent major industrial accidents, with the next major indicator for industrial demand being the upcoming PMI data.
President Xi Jinping has called for an "uncompromising" investigation into the disaster, with preliminary reports suggesting "serious violations" occurred at the Liushenyu facility, according to state broadcaster CCTV. The high-level response signals that the safety inspections could be both prolonged and severe, impacting production across Shanxi, China's coal belt.
"Every accident serves as a wake-up call," an editorial in the state-run People's Daily said on Sunday. "We must completely reverse the tendency to prioritise development over safety."
While the Liushenyu mine itself is a mid-sized operation, the market reaction reflects the expectation of widespread production halts and inspections across the industry. This has been the typical pattern following major mining accidents in China, said David Fishman, a Shanghai-based principal at The Lantau Group. The tightened supply outlook for coking coal could increase costs for China's steel industry, a critical component of its construction and manufacturing sectors.
This article is for informational purposes only and does not constitute investment advice.
