Major steelmakers are yet to state their positions over the first round of 100-200 yuan/t coke price hike even after some smaller mills and traders gave nods, the reason being uncertainty about sustainability of good steel demand amid growing talks of production curbs in the run-up to the Winter Olympic Games.
It was reported that some mills in Hebei-Beijing-Tianjin area were asked to halve production from January 25 to limit air pollutions for the world event. However, this was not the first time that market participants had talked about the restriction on polluting industries, and none of the speculations has been confirmed by authorities so far.
The market is keen to talk about production curbs because when the last time China hosted the international sport events in August 2008, it imposed deep production restrictions to industrial companies within 300 km of the capital city in late April and extended the curbs to wider areas in Shanxi, Shaanxi, Hebei, Inner Mongolia and Shandong half a month before the games kicked off.
More than 50% of the steel capacity in the country was affected to different extent for at least two months due to the events, which raises concerns that production curbs on steel sector would also be strict this time. And if so, mills’ coke purchase would be revised down temporarily to avoid potential inventory pressure, despite outlook for a likely improvement in demand for steel in the next spring.
Chinese coke producers have seen a noticeable increase in sales to traders and low-stocked mills since the start of the month, partly for winter replenishment at bottom prices.
Sxcoal data showed coke stocks held by the surveyed coking plants declined fast for the fourth straight week on December 20 to hit a new low in nearly three months, while coke inventories at mills picked up moderately for the fifth week in a row and hovered at a comparatively high level.
The fast decrease of stocks encouraged some coke producers to raise offers by 100-200 yuan/t at the start of last week for the first time after eight straight rounds of decrease totaling 1,600 yuan/t in the preceding month.
The price hike was then joined by more coking plants from Shanxi, Hebei, Shandong and Jiangsu, following a regionalized increase in coking coal prices.
Despite the lack of response from major mills, most participants still saw a high likelihood of the materialization of the first price hike.
The projection not only takes into account the strong rebound in coking coal prices that are gradually eating into coke profit, but also the improvement in steel mills’ profits after the slumps in raw material prices in November, allowing them to accept a bit higher spending in buying coke.
However, a further rise of coke prices is expected to face more resistance, impacted mainly by the policy-led restrictions over steel and coke, as well as the strength in the on-going pickup in coking coal during the intensified coal mine scrutiny.
On December 21, Fenwei CCI Index for Shanxi low-sulfur primary coking coal stood at 2,395 yuan/t, ex-washplant with VAT, up 90 yuan/t from the preceding day; the index for Shanxi high-sulfur primary coking coal was at 1,942 yuan/t, up 62 yuan/t.
On the same day, Fenwei assessed the price of Luliang Quasi Grade I coke in Shanxi at 2,460 yuan/t, ex-plant with VAT, and Tangshan Quasi Grade I coke in Hebei at 2,660 yuan/t, on a delivered basis with VAT, both unchanged compared with the week-ago levels.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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