New Hope Corp shares (ASX: NHC) have entered correction territory after a fifth consecutive session of losses, with the company caught between the lingering tailwinds of China’s Shanxi supply shock and mounting headwinds from a deeply unprofitable Chinese steel sector. The pull of these two contrasting forces is creating a complex picture for markets after what has been a huge year of outperformance.
The NHC share price heads into Thursday’s open at A$5.85, after falling 2.34% in the most recent session to sit 11% below the recent high of A$6.61 reached just a week ago. The five-day losing streak has been sharp enough to push the stock below its 30-day simple moving average of A$6.03, a level that had been acting as near-term support and carries psychological significance for those who watch the technicals.
From a momentum standpoint, the RSI tells a similarly dramatic story, which after jumping to an overbought reading of 81.25 during the rally, has since cooled off to 41.13, a level that suggests the rally is losing momentum. For a stock that had been running hot on the back of Chinese import demand, the technical reset is notable, though it stops short of signalling a breakdown.
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The rally in recent months followed a fatal mine accident in Shanxi province in May, triggering a sweeping safety crackdown across China’s most productive coking coal region, and the effects continue to reverberate through global supply chains. A recent survey found that 75 coking coal mines across Shanxi remain shuttered, representing approximately 73 million tonnes of annual production capacity still offline. That is a significant structural hole in the world’s largest coal market, and one that has not been filled by domestic alternatives alone.
Chinese coking coal imports reflected that pressure clearly, as August imports came in at 13.1 million tonnes, easing 4% from July’s peak but still running 29% higher year-on-year, and not far from the record levels set in December 2025.
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Increased shipments from Australia, Mongolia and Russia have helped absorb some of the shortfall, and Australian producers including New Hope have benefited from the elevated import demand. However, analysts caution that the supply gap is not going to close quickly, with full normalisation of Shanxi supply not expected until the first half of 2027.
That delayed recovery timeline should, in theory, keep a floor under seaborne coking coal demand and support pricing for exporters like New Hope, yet the complication is what is happening on the demand side of the equation.
Singapore iron ore futures, another barometer of Chinese steel sector health, last traded at $96.55 per tonne, a level that underscores the broad softness in steelmaking raw material demand. When iron ore and coking coal futures are both retreating simultaneously, it typically reflects reduced mill output ambitions rather than a temporary pricing anomaly.
What Lay Ahead?
On the supply side, the Shanxi disruption remains unresolved, and with 73 million tonnes of annual capacity still idled until 2027, the structural case remains intact over the medium term. On the demand side, however, the picture is more challenging. Steel mill margins in China are under severe pressure, and a sector where fewer than one in fourteen mills is operating profitably is not one that will aggressively chase higher raw material costs. The 12% decline in Dalian futures from their August highs reflects that demand-side constraint, and until mill profitability improves, the ceiling on coking coal pricing will remain lower than the supply disruption alone might imply.
From a technical standpoint, the RSI reset from 81.25 to 41.13 has removed the overbought condition that had made NHC more vulnerable to a pullback, and after five days of selling, the stock is now approaching levels where value-oriented traders may begin to reassess the risk-reward. Continued holds above the 50 day SMA of A$5.74, and a break back above the 30 day could be a meaningful signal that buyers are not done with the 44.44% YTD rally just yet.
