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Coking coal, the material used by steelmakers to fire their blast furnaces, has become the best performing commodity of 2016 after surging more than 80 per cent over the past month on the back of production curbs and flooding in China.

Premium hard Australian coking coal delivered to China hit $180.9 a tonne on Friday, this highest level since price reporting agency Steel Index began publishing assessments in 2013. It has risen 131 per cent since the start of the year, outpacing gold, silver, iron ore and zinc — other top performing commodities.

The main driver of the rally — which has also roiled thermal coal — is Beijing’s decision to restrict the number of working days at domestic mines to 276 days per year from 330 previously.

This policy is aimed at the improving the profitability of producers so they can repay loans to local banks. But it has reduced output and forced traders and steel mills to buy imported material from what is known as the seaborne market.

Heavy rains across China’s northern coal fields in August have exacerbated the supply squeeze, forcing China to buy more overseas. Late on Thursday, traders said a cargo of coking coal had changed hands at $190 a tonne.

“China has rushed back into a tiny seaborne trade to top up,” said analysts at Morgan Stanley in a recent report.

Although 280m tonnes of seaborne coking coal is traded each year, most is done on quarterly contracts, directly between buyer and seller. Only a third of deals are done in the spot market. This makes the commodity highly sensitive to changes in supply and demand — particularly if China’s huge steel industry needs material.

Industry watchers do not think the price surge can continue for much longer as rising costs will make it difficult for mills in China — the world’s biggest producers of steel — to make money. Higher prices might incentivise new seaborne production.

“Should coking coal prices keep rising while steel prices remain at current level, Chinese steelmakers risk returning to negative margins,” said Miriam Falk, senior analyst, S&P Global Platts.

She calculates that coking coal now accounts for about half of the raw material costs in pig iron production — an intermediate form of steel — up from an average of 40 per cent over the past year.

While the upswing in seaborne coking coal prices is good news for producers struggling to navigate the worst downturn in a generation it is unlikely to deliver an immediate profit windfall, say analysts.

The exception is BHP Billiton, the world’s biggest natural resource company by market value.

The Anglo-Australian mining company has been leading a push for an index-based pricing system and now sells most of its coking coal on spot market terms unlike rivals Anglo American and Rio Tinto. However, the price surge may help Anglo American to sell two Australian coking coal mines.

“The $70 a tonne move in coking coal prices in since the beginning of July has added $3bn to BHP’s mark-to-market earnings,” said analysts at Liberum, who reckon the sustainability of the rally depends on how long Beijing maintains its restricted working days policy.

“The government will be questioning whether subsiding the coal industry at the expense of the steel industry is a desired outcome.”