August 7, 2018 / 10:19 AM / a year ago

Chinese coal futures surge by most since August 2017 as short sellers close out

Piles of imported coal are seen at a coal terminal of a port in Lianyungang, Jiangsu province, China July 26, 2018. REUTERS/Stringer

BEIJING (Reuters) - Chinese thermal coal futures on Tuesday surged by the most since August 2017 as traders with bets on falling prices paid up to close out their positions in the market.

The most-actively traded coal futures on the Zhengzhou Commodity Exchange (ZCE), for September delivery, soared as much 5.5 percent to 622 yuan ($91.06) a tonne on Monday, the biggest intra-day percentage gain since Aug. 25, 2017.

The contract last traded at 615.5 yuan a tonne at the close, up 4.4 percent.

Prices fell as traders that were selling futures in the expectation of falling prices, known as short selling, bought back contracts to close out those positions.

The top 20 futures brokers in the coal contract held 13,463 more short positions than long positions, or bets for rising prices on Friday, according to data from the ZCE. By Tuesday, long positions outnumbered shorts by 895 contracts.

Open interest in the September contract has plummeted 20 percent in the past two days, also indicating that traders were closing positions in the market.

“Investors in the (coal) futures market closed short positions leading to a strong price rally,” analysts from CITIC Futures said in a note on Tuesday.

Reporting by Muyu Xu and Tom Daly; Editing by Christian Schmollinger

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