Asian spot prices for imported metallurgical coke have had a bull run throughout the past quarter, with prices rising by over 12.5% so far since July 1.
CoalMint assessed the latest price for the 64% CSR met coke grade at around $305/t CNF India, compared against $270/t as on July 1.
The question now being asked by buyers and traders alike is whether this run will last till the next year or will peter out.
The answer depends on the confluence of three major driving factors, all of which stemmed from China, the world’s largest steel producer and met coke consumer.
China, for years the world’s largest exporter of met coke, became a net importer this year for the first time in more than 20 years. The country’s coke imports have increased steadily since July this year, while exports for most months stayed lower than last year.
What caused the steady spurt in met coke import demand from China?
- The strong import demand for met coke has emerged in China as widespread capacity cuts and coking coal supply tightness limited met coke production.
- Repercussions of China’s informal ban on Australian coal imports has aggravated the country’s coking coal shortage and pushed domestic met coke prices higher.
- The strengthening Yuan against the dollar has been attracting buyers in China to opt for higher imports of met coke.
Coke becoming costlier in China, with production declining amid coking coal shortage
Chinese domestic met coke output kept declining this year, as numerous cokeries deepened production curbs in a wide range due to short supply of raw material. Meanwhile, coke demand stayed relatively firm due to full-fledged blast furnace capacity utilization at steel mills.
Besides, the gradual implementation of governmental de-capacity policies, to phase out outdated coking capacity in China’s Shanxi and Henan provinces, gave further impetus to the reduction in domestic met coke output.
Coke stocks at steel mills and ports have drastically fallen as a result, with a severe supply shortage expected to continue in the coming months.
Additionally, China’s domestically-produced met coke prices have shot up further, as the country’s coking plants have become obliged to source coking coal from domestic producers and alternative origins following the recently rumored import ban on Australian thermal and coking coal from October 12.
Although it is difficult to substitute Australian premium hard coking coal, Chinese steelmakers have multiple alternative seaborne origins for sourcing met coke such as Poland, Japan, South Korea and Russia.
CNF China prices for met coke are currently assessed at $280/t (Poland), $275/t (Japan), $270/t (South Korea) and $265/t (Russia).
Outlook—
There is expectation of persistent tight supply in the global seaborne met coke market, which would fuel up bullish sentiments. It is also expected that more and more coking plants are set to call for price hikes in the short term.
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By Aditya Sinha
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