Chinese nightmare 300 meters underground
Tragedy in the private Liushenyu mine is the darkest scenario for the global mining sector since 2009. Methane explosion 300 meters underground claimed at least 82 fatal victims. Unfortunately, it is another classic example of profit chasing over safety, as too many miners without proper protective gear were in the tunnels. Beijing’s response was immediate. President Xi Jinping and Premier Li Qiang announced a rigorous investigation, and the disaster area received as many as 800 rescuers. Shocking neglects also emerged, triggering a wave of mass inspections and unprecedented production paralysis.
In the Qinyuan province, mines received an oral order to halt work immediately and ban the entry of employees. Among others, two large thermal coal plants with a combined capacity of about 1.8 million tonnes per year were shut down. The entire Shanxi province, responsible for 25% of China’s coking coal output, came to a standstill. Mines will only reopen after a full safety system verification, which will drastically limit global supply.
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Steel mills without raw material
This sudden supply interruption triggered an immediate chain reaction in heavy industry. Chinese steel mills officially reported that raw material stocks had fallen to critical levels, effectively meaning a total lack of raw material for ongoing production. The market situation is further worsened by the geological specificity – coking coal is a high‑quality variety deeply rooted in methane‑rich structures. High rock pressure dramatically increases the risk of sudden bursts and explosions.
Adding to this are dramatic reports from India about a critical lack of coke, whose combination with a massive production halt in China creates an unprecedented supply gap. Global players currently have nothing to fill it, making it ideal conditions for aggressive price speculation.
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Stock market eldorado – JSW and Chinese giants on top
For dynamic traders and advanced trading algorithms, these reports were a clear signal to buy. Futures on coking coal immediately shot up to the daily maximum limit of 8%, dragging iron ore valuations and steel contracts along. On Asian trading floors, screens lit up with pleasant green. Shares of Shanxi Lu’an Environmental Energy rose by 9.2%, and Jinneng Holding Shanxi Coal Industry climbed by 7.4%.
Importantly, this wave of optimism also struck the Warsaw exchange. Shares of Jastrzębska Spółka Węglowa (JSW) recorded an impressive rally of 4.35% to 29.53 PLN, although investors know well that the company has been struggling with a fatal financial situation recently. Notably, yesterday (May 25) at market close JSW shares rose by as much as 7.52%.
Stock market investors accurately calculate the risk – since China cuts 25% of its production capacity, European producers gain a powerful price advantage. Every tonne of domestic coking coal from JSW will now be valued much higher, generating profit streams denominated in USD.
Chart. JSW share price.
Source: TradingView.
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Source: Bloomberg.
