Weekly Playbook (W/C 2026-08-30)

Recap

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This was a rather painful week for a coking coal bear. In the first few days, JM2701 did fall in price, but from Thursday it started to rise very quickly. On Friday night, the move was even more significant.

Observations

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I would like to summarize the factors affecting the price of coking coal this week as follows.

Supply

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Coal supply mainly comes from domestic production and imports from Mongolia.

For domestic production, due to tightened safety checks following the accident in May, Chinese coal production remains low. In terms of imports from Mongolia, the volume of coal transported by truck through Ganqimaodu remains very low, roughly half of normal levels. Sources cite a shortage of diesel in Mongolia, strict environmental regulations slowing border crossings, and port construction reducing capacity - there are all kinds of reasons, and I don’t know which to believe.

It is also said that Russia will extend its diesel export restriction from the end of August to the end of September. If true, this would be really bad news for bears.

Demand

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Coke prices were raised twice in the last few days, and it is said that steel companies accepted the hikes quite smoothly. A third increase has been proposed, and some steel companies are said to have accepted it, taking effect on 31st August, which is tomorrow. If profit transmission can be so smooth, that is also bad news for bears.

There was also a major policy release concerning the real estate market. This too is bad news for bears.

Price-volume Action & Positioning

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I think this is the most interesting part, and also the most dangerous for bears.

From 26th August, large institutions started to add to their long positions on JM2701, especially CITIC. On Friday, the adding was very aggressive for Guotai Junan, Yongan, and CITIC. In Friday night’s session, JM2609 struggled to move higher, while JM2701 moved up violently. It is said that DCE performed window guidance on some longs in front-month contracts, only allowing them to close positions. This explains why JM2701 rose so violently.

Now, the net short positions in JM2701 for the top 20 bears has already turned negative, with an absolute value exceeding 10,000. This means the top 20 combined have a net long position in JM2701. This is an important lesson to learn, as last week I thought positioning was already very extreme - at that time, the net short position was near zero, but was at least positive.

Plan

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