Recap #
Coking coal did fall this week. Note that the fall was accompanied by a considerable decrease in open interest, which means that the decline was mainly driven by bulls closing out positions. This can be validated by the position data from DCE.
Observations #
This week the biggest event happened in the Middle East, where the Houthis made remarkable advances in Yemen, gaining the ability to control yet another strait in the Middle East. This drove oil prices to a new high in several months, creating pressure on the bond market and the equity market. Next week there will be an FOMC meeting, and given the price index released this week, the market now expects a rate hike next week. If there is indeed a rate hike next week, there will be pressure on all markets, including commodities.
On coking coal, even though imports from Mongolia have not recovered to normal levels, negative feedback has been observed in the downstream market. This means that there is still downside for coking coal. On the upside, the events in the Middle East have not had an impact on the coking coal market, but there is a chance that the gasoline shortage will hit Mongolia again, given the current high oil prices (even though Russia and China may help Mongolia with that). However, given that daily imports of Mongolian coal remain low, the upside is still limited.
Plan #
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