A looming risk for even lower coke prices is likely to put Chinese coking coal market under downside pressure again, following recent signs of slowly improving offtakes and even price rebound in some grades.
This came shortly after a major steelmaker in top steelmaking Tangshan city in China’s Hebei was said to plan for the second round of coke price reduction of 200 yuan/t from July 5, in a move to ease their operational burdens caused mainly by lukewarm steel sales.
Late last week, three steel makers in Shanxi made the same proposals, but haven’t been accepted by coke producers as of writing.
There could be higher likelihood for eventual implementation of the price cut despite coke firms’ resistance on this, as long-time stalemate won’t help the whole industry move on to a positive cycle.
“The coke sector, actually a middle link in the supply chain, is fated to suffer some losses when the whole industry chain in not in a downtrend” a Shanxi-based coke producer noted.
The slightly improved coke-making profit may face decline again and further dampen their already low coal replenishments, according to a coal miner in Shanxi.
Coking coal inventory at the surveyed coking plants decreased 0.14 day from a week prior to 9.76 days’ worth of consumption last week, showed Sxcoal’s weekly survey.
This could overthrow expectations for a temporary stabilization in both coking coal and coke markets. Coking coal auctions had been in a positive turn last week with no more cancellations reported and some even concluded higher than starting prices.
Last week, supply and demand stuck a tight balance in both coking coal and coke markets, a fundamental factor that temporarily prevented price declines. In the meantime, participants saw weaker confidence among steelmakers to continue beating down coke prices due to their low stockpiles.
The raw material markets are likely to bear pressures from the jittered steel market in the near term, as it may continue to grapple with bad sales of finished steel amid sluggish housing market, slack construction season and COVID-hit manufacturing sector.
The impact could spread to Mongolian coal trades at border crossings, especially when Mongolian coal supply is increasing with greatly eased COVID-related restrictions on the borders.
Mongolian coal hauls into Ganqimaodu border crossing further ramped up to 520 trucks on July 2, maintaining above 500 trucks for four days, Sxcoal’s tracking data showed.
The prevailing offers for Mongolian 5# raw coal stabilized at 1,910 yuan/t, ex-stock Ganqimaodu with VAT, temporarily buoyed by increased long-term contract prices for the third quarter.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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