High coking coal prices and rising transportation cost continued to erode coke-making margins in China, pushing some coke firms to propose a third round of 100-110 yuan/t hike in coke prices on December 7.
Some coke producers from Shanxi, Shaanxi, Hebei, and Inner Mongolia proposed to raise coke prices as high feed coal and logistics costs still made them unprofitable despite the previous two rounds of price increase in November.
Sxcoal learned some online auctions of primary coking coal in the country’s leading production province Shanxi were settled at around 300 yuan/t higher than their low levels in around mid-November. Some inferior grades also climbed by varying degree according to regional supply fundamentals.
On December 7, Fenwei CCI index for Shanxi low-sulfur primary coking coal stood at 2,428 yuan/t, ex-washplant with VAT, up 213 yuan/t from a low in mid-November. The index for Lingshi fat coal grew 200 yuan/t during the same period.
The increases have basically offset the rise of coke prices at 200-220 yuan/t during the same period, leaving most coking plants still stretching to reach a break even point.
Some coke firms contacted by Sxcoal were running at a loss of more than 100 yuan/t as of December 7.
A subdued transportation capacity amid regional COVID-19 restrictions had resulted in higher logistics costs to restock the feed coal, which added to the coke-making costs.
However, unlike the previous two price hikes, the ongoing proposals are encountering greater resistance from steel mills.
Some steelmakers in Shanxi, Hebei and Tianjin have expressed their resistance to the hike due to bleak margins.
“There is still a likelihood that mills may finally agree with the rise, given their low coke inventories. Some mills are restarting blast furnaces and their coke replenishment would be resilient at a time when coke production enthusiasm remains subdued because of loss,” said one source with a Tangshan-based steel mill in Hebei.
Some coke producers reckoned coke-making profit would remain bleak if the 3rd increase materializes, mainly as the coking coal prices remained on the upward moves.
On December 7, one large coke firm in Inner Mongolia issued a tender seeking 20,000 tonnes of high-ash and low-sulfur coal (S 0.8%, A 12%) at a final price of 1,950 yuan/t, rising 100 yuan/t from December 2 and adding to a total rise of 302 yuan/t from a low in November.
The prevailing offers of lean and meager lean coal in Changzhi of Shanxi rose by 100-220 yuan/t on December 7 for the first time since November, Sxcoal learned.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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