China: Losses for met coke producers worsen after price cut

• Average loss among producers hits over 2-month high
• Production remains steady despite poor profitability

Mysteel Global: After the latest RMB 50-55/tonne (t) ($7-7.7/t) reduction on metallurgical coke prices this Monday, Chinese producers reported deteriorating margins, according to Mysteel’s latest survey.

The average loss among 30 independent coke producers that Mysteel regularly tracks across the country deepened to RMB 46/t as of 26 June, doubling from the previous week and hitting the highest level in more than two months, the survey result shows.

Among the country’s key met coke producing hubs, sampled producers in Northwest China’s Shaanxi province were suffering the severest losses of RMB 88/t. In contrast, those located in North China’s Hebei kept an average margin of RMB 27/t, albeit falling about 45% from the week-ago level, according to the survey.

However, except for some producers in Inner Mongolia, northern China, whose operations were disrupted by environmental protection inspections, most coke plants still maintained their previously brisk rhythm of production despite mounting financial pressures on them, sources noted.

During 19-25 June, met coke production among the 230 independent coke makers averaged 516,700 t/day, down a minimal 0.2% from the week earlier, according to Mysteel’s assessment.

While coke makers are reluctant to reduce their production, the supply-demand mismatch of met coke will largely extend in the near term, as steelmakers in general tend to manage their inventories of feedstock cautiously in the off-season for steel consumption, according to a Shanxi-based analyst.

Although a positive reversal has yet to come, the bearish outlook for the market eased as more participants expected the market to stabilise following clear improvements in steelmakers’ profit margins.

On Thursday, Mysteel’s assessment of the national composite met coke price stayed at 1126.2/t, including the 13% VAT, unchanged from the previous day.

As sentiment lifted, the futures market recorded gains yesterday, with the most-traded met coke contract for September delivery on the Dalian Commodity Exchange rising 1.9% by the end of the daytime trading session to RMB 1,395.5/t.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.