- Producers cut prices twice in May by RMB 100-110/t
- Limited mill demand, rising output cause supply glut
Mysteel Global: China’s prices of metallurgical coke seem set to decline further this month due to multiple downside pressures in the market, Mysteel’s monthly outlook report on the commodity warns.
Twice during May, the country’s independent met coke producers were obliged to reduce their selling prices to their steelmaker customers, cutting their prices by RMB 100-110/tonne (t) ($13.9-15.3/t). These reductions, together with rising output among coke makers, have served to soften the market.
Following the price cuts that were effective from 16 May and 28 May, respectively, the national composite met coke price as assessed by Mysteel had fallen to RMB 1,246.3/t as of 30 May from RMB 1,337/t recorded on 30 April, a reduction of RMB 90.7/t.
Chiefly blamed for the reduction in prices is the steelmakers’ pursuit of profits ahead of the seasonal summer lull in steel consumption in China. However, the price concessions made by met coke producers failed to encourage those steelmakers that do not have their own coking capacity to procure more met coke, the report notes. Indeed, their inventories fell during May.
As of 29 May, met coke stocks held by the 247 blast furnace (BF) mills regularly monitored by Mysteel had declined to 6.55 million tonnes (mnt), according to Mysteel’s assessment, from 6.75 mnt on 1 May.
While the mills’ profit margins had shrunk alongside the falls in steel product prices, they tried to cut their costs on feed materials by reining in their purchases, a Shanxi-based analyst said.
As the negative seasonal impact on steel demand will probably loom larger as summer arrives, the bearish performance in the steel market may show little improvement. Consequently, the risk of met coke demand contracting further will intensify this month, exerting downward pressure on met coke prices, the Shanxi analyst added.
On the other hand, while procurement among steelmakers remained sluggish last month, Chinese met coke plants operated briskly during the period. Throughout May, the 230 independent coke makers that Mysteel tracks sustained their average capacity utilisation rate at above 75%, producing an average of 535,380 t/day in May, according to Mysteel’s latest surveys, compared with an average of 525,375 t/d during April.
This mismatch between met coke demand and supply has created a glut in the market, with coke stocks accumulating markedly at coke plants. According to Mysteel’s assessment, inventories among the 230 sampled coke plants sat at 783,300 t as of 29 May, jumping by nearly 17% from the 670,600 t on 1 May.
Moreover, the stocks could swell further in June since the coke plants have not slowed their production. “Under present conditions, reducing production would only incur graver losses for coke makers,” the Shanxi analyst explained, “so they might sustain their brisk operations for some time.” With demand for met coke expected to weaken this month, the coke makers’ selling pressures will only escalate more, she added.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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