Outlook for China’s met coke market remains gloomy

• Steelmakers push third coke price cut amid weak margins
• High coal stocks and soft demand strengthen bargaining power

Mysteel Global: The near-term outlook for the Chinese metallurgical coke market remained dim on December 17, as anticipation of another met coke price cut from steelmakers intensified among market participants.

Market sources disclosed that steelmakers would attempt a new met coke price reduction next week, the third round since late November, with the cut expected to materialize within the week.

“The poor profitability remains a main driver for steel mills’ potential push for lower raw material prices,” an analyst based in North China’s Shanxi province said. According to Mytseel’s survey of ten integrated mills in Tangshan city, North China’s Hebei province, as of December 17 they were losing an average of RMB 115/tonne ($16.3/t) on billet sales, marking only a moderate RMB 10/t improvement compared with a week prior.

While steel mills try to squeeze margins from their coke suppliers aggressively, a weaker demand for the raw material in tandem with increased maintenance shutdowns at their blast furnaces recently has provided them with stronger bargaining power in price negotiations with coke producers, the Shanxi-based analyst added.

Meanwhile, the analyst also warned of softer support from the cost side, predicting that domestic coking coal prices would trend lower in the near term, as the present ample coal inventories at coke plants may keep their interest in coal feed replenishment subdued.

According to Mysteel’s latest survey of 230 independent coke producers nationwide, as of December 11 their combined coking coal stocks reached 8.83 million tonnes (mnt), up 1.2% from the year-ago level.
If coking coal prices do fall further, however, steelmakers may leverage the situation to chase a fourth met coke price cut in the future, the analyst cautioned.

On Wednesday, Mysteel’s assessment of China’s quasi-first-grade met coke prices, for wet-quenching and dry-quenching types respectively, stayed unchanged from the previous session at RMB 1,485.4/t and RMB 1,620.7/t with VAT.

In the derivatives market, the most-traded met coke contract for next January delivery on the Dalian Commodity Exchange mounted to RMB 1,530.5/t by the end of Wednesday’s daytime trading session, up 1.9% from Tuesday’s settlement price.

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