Chinese metallurgical coke producers’ moods further brightened as some low-stocked steel mills started to accept the first round of coke price hike amid a further strengthened bullish sentiment on the production side.
More coke producers from Shanxi, Shandong, Hebei, and Jiangsu proposed to raise coke prices by 100-120 RMB/t this week, following a Shanxi-based major coke firm’s 200 RMB/t increase request last week.
Although major steelmakers have yet to respond, market participants saw it highly likely to materialize, viewing growing support of costs and a quickened decline in stocks.
Coking plants are expected to spend more on coking coal stocks build-up, not only because of low inventories but also higher buy prices for the feed coal.
Sxcoal data showed the coking coal stocks at surveyed coking plants still hovered at a more than 4-1/2-year low, at 2.9 million tonnes on December 13, which was down by more than 40% from a year-to-date high of 4.9 million tonnes on February 8.
Coke stocks at the surveyed coking plants extended the decline, down by 31.6% from a week ago to reach 318,100 tonnes on December 13. It marks the third straight week of decline and hit a new low in the recent two months, Sxcoal data showed.
The accelerated decline of product stocks and low feed coal inventories suggested a high likelihood of stronger replenishment demand soon afterwards, while the fact that coking coal prices further perked up at wider production areas could again eat into coke profit, forcing more coke producers to press for the hike.
Downstream steel mills found supply constraint for high-quality dry-quenching coke, while supply of inferior coke remained relatively sufficient. Some mills, especially in the southern part of China, have started to prepare for winter replenishment ahead of the Spring Festival in late January.
The view that coke prices have already hit the bottom also spurred coke purchases by mills and traders, which also propped up sentiment in the coke market.
However, most participants reckoned the upward space for coke prices may not be big, although the steel-making material prices fell by eight consecutive rounds by totaling 1,600 RMB/t in the preceding month, with the most significant reason lying on the lukewarm steel demand in the off-season and restrictions on steel production during the heating season and the Winter Olympic Games.
Real estate, a major steel consuming sector, remained in low ebbs. China’s real estate climate index stood at 101.51 points in November, a month-on-month drop of 0.12 point, hitting the 14-month low, according to the latest data released by the National Bureau of Statistics on December 15.
The real estate climate index is a composite index reflecting the current situation and development trend of the Chinese real estate market.
China’s real estate investment grew 6% year on year during January-November, the slowest growth since October last year. The yearly increase in commercial house sale areas also hit the lowest in the year during the first 11 months, the NBS data showed.
The development from auto industry, also a key steel-consuming sector, still lacked strength. China’s Auto production sales were respectively 9.3% and 9.1% lower compared with the year-ago levels, according to the latest data from the Ministry of Industry and Information Technology on December 10.
Note: This insight has been published in accordance with an article exchange agreement between CoalMint and Sxcoal.com.
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