Coke producers in China have seen a fall in profit margins and operating costs since the second half of CY’21 which indicates that there is no bottleneck in production capacity of coke in China, as per a Lange Steel report.
It is pertinent to mention that coke prices are decided based on coking coal prices and the latter is priced based on thermal coal prices.
The price trends of coking coal and thermal coal have stabilised after a quite some time.
The price conversion ratio of coking coal and thermal coal generally ranges between 1.4:4. The average conversion ratio is at 2.18 which currently stands at 2.
For instance, if thermal coal prices fall to RMB 600/tonne (t) ($94/t) levels in CY’22, the conversion ratio of coking coal, calculated at 2.5, will come to around RMB 1,500/t ($235/t). And if the coking plant is offering a profit of RMB 300/t ($47/t), the port-side price of coke will be around RMB 2,200/t ($345/t).
Coke prices at this level and iron ore fines at RMB 500/t ($78/t) with taxes included will make a production cost of RMB 3,100/t ($486/t) for rebars.
Hence, based on the above calculation, it could be evaluated that China’s coke prices will likely range across RMB 2,200-3,500/t ($345-549/t) in the future.
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