- Higher coking coal costs and production cuts support coke prices
- Increased coal supply, weaker steel demand weigh on market sentiment
Mysteel Global: Some Chinese metallurgical coke producers have been mulling production cuts recently, as the sustained rally in coking coal prices has significantly pushed up their production costs and left them barely any profit margins, according to market sources.
Mysteel Coke Index (MCI) CDQ, which tracks China’s national dry-quenched quasi-first-grade met coke prices, stood flat from the last session at Yuan 1,786/tonne ($263.3/t) on Monday, while the MCI CWQ for wet-quenched quasi-first-grade met coke was also unchanged at Yuan 1,631/t, both including VAT.
Most coke firms are now operating near break-even, as the sharp rises seen in coking coal prices over the past two weeks have more than offset the benefits of the latest rounds of coke price hikes, sources shared.
Some coking coal varieties have recorded cumulative surges of over Yuan 300/t in this bout of uptrend starting late May, while met coke prices have only risen by Yuan 100-110/t so far. Monday saw another Yuan 150/t jump in Xiangning lean coal price in North China’s Shanxi province, settling at Yuan 1,590/t EXW with VAT, Mysteel learned.
Sources disclosed that some top-charged coke operations and plants with low stocks of the feed coal have slipped into losses, prompting them to scale back production. However, plants already running at low utilization rates said they would not cut output further, as that could only deepen their losses.
For coke firms still running at normal rates, they also voiced concerns about near-term coal procurements and mounting cost pressures. Shanxi-based coke producers noted that availability of low-sulfur primary coking coal and fat coal remained tight, while blending grades were in relatively ample supply.
After steelmakers decided to accept the Yuan 50-55/t increases in met coke prices from Wednesday, sources expected major coke producers to initiate a fresh round of price hikes this Friday, hoping to slightly ease their cost burdens. This will mark their seventh attempt to raise prices since late March and is widely anticipated to win steel mills’ nods.
The domestic steel market softened marginally yesterday, as the national college entrance exam over June 7-9 and increasing rains in southern China led to many suspensions of construction work across the country, thus subduing steel consumption. But analysts expect limited downside room for steel prices in the near term due to firm cost support.
Coke derivatives, however, took a dip on Monday, as market sentiment cooled markedly after the Shaanxi Development and Reform Commission directed coal mining hubs in the province to boost production and ensure supplies for power generators ahead of the summer peak demand season, according to an official notice issued on its website on Monday.
On the Dalian Commodity Exchange, the most-traded coke contract for September delivery tumbled by 3.13% to close Monday’s nighttime trading session at Yuan 1,978.5/t after a 1.46% dip in the daytime session.
China’s portside coke market also ended its consecutive rises on Monday, with traders waiting on the sidelines for more clarity of the market. Mysteel assessed wet-quenched quasi-first-grade coke (CSR 60%) and first-grade coke (CSR 65%) at Yuan 1,730/t and Yuan 1,830/t respectively, ex-stock Rizhao port, both up Yuan 20/t from the previous session and including VAT. Dry-quenched quasi-first-grade coke was stable at Yuan 1,940/t.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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