Metallurgical coke inventories continued to accumulate at major production areas in China as the downstream steel mills gradually retreated to the sidelines in wake of concentrated restocking, adding to the negative outlook for the pre-holiday demand for coking coal.
Sxcoal’s tracking data showed coke inventories at the surveyed coking plants climbed 12.1% week on week to 0.56 million tonnes on January 5, accelerating from a 3.9% rise in the preceding week, while coke production at these firms inched down 0.3% week on week.
These data pointed to a significant contraction of appetite from the demand side, in line with a downtrend in the steel production data.
The latest data from China Iron and Steel Association showed the member firms’ daily crude steel output stood at 1.92 million tonnes during December 21-30, falling 2.44% compared with the previous ten days and marking three straight sessions of decline.
Besides, the narrowing pre-holiday restocking demand also contributed to weak coke dispatches.
“The pre-CNY holiday restocking demand by steel mills has nearly closed to an end. With rational inventory levels, mills are generally capping daily intakes, although there is still a need to keep buying to cover demand until after the holiday season,” said one source with a Tangshan-based steel firm in Hebei.
“Given a loose supply fundamental, coke prices are likely to fall at least another 100 yuan/t by the holiday,” said one Shanxi-based steelmaker.
“One leading steel mill in Rizhao of Shandong, held around half-month worth of coke stocks, but the firm typically stocks 20-30 days of stocks during the CNY holiday period. The pending restocking means a buffer to keep coke prices from falling too fast,” said one coke producer source in Shandong.
Growing coke inventory weighs on coking coal demand
The rising product stocks at coking plants are expected to hold up production enthusiasm as well as restocking demand for the feed coal.
Sxcoal’s tracking data showed coking coal inventories at the surveyed mines still slid 1.8% week on week to 2.37 million tonnes on January 5, but the decline narrowed from 3.6% and 7.8% respectively on December 29 and December 22.
“Miners do see a reduced new buying appetite from coke firms, but the existing orders could still keep some miners busy running,” said one Luliang-based miner in Shanxi.
Sxcoal learned coking coal output of the firm in December was low as it ran at half of the normal capacity due to a lack of labor amid peaking Omicron infections. Therefore, there were still a lot of outstanding orders needed to be fulfilled.
The overall coking coal demand by coke firms weakened this week compared with late December, which could partly be justified by falling settlement levels of online auctions in Shanxi.
On January 6, one auction of 6,000 tonnes of mid-sulfur primary coking coal (S 1.1%, A 10%, G 78) in Luliang of Shanxi was started at 2,000 yuan/t, unchanged compared with January 4, but all was settled at 2,110 yuan/t, down 85 yuan/t from the preceding level.
The growing prudence of coke firms also led to a thickened wait-and-see sentiment at the port-side market, with some offers of imported coking coal starting to retreat.
Some spot Russian low-ash K4 coking coal offered were heard between 2,200-2,250 yuan/t, ex-stock with VAT , down 30-50 yuan/t week on week, Sxcoal learned.
On the CFR China market, limited trades were done this week partly due to growing hesitation of Chinese buyers for far-arrival cargoes, which might be affected by China’s re-imposition of import tariffs on coal from April 1.
The market is closely keeping an eye on any potential purchase of Australian coking coal made by Chinese buyers amid growing talks on China’s partial removal of the unofficial coal ban.
Australian coal prices were buoyed. A deal of 50,000 tonnes of Australian premium mid-vol Moranbah North coking coal was heard to have been done by non-Chinses buyer at $315/t FOB with February 28-March 7 loading laycan.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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