China: Weekly coal and coke market highlights

Chinese domestic metallurgical coke prices have remained supported on the back of tightening supply as a result of production cuts.

Major steel mills have accepted the sixth round of price uptick by CNY 50/t, marking a cumulative increase by CNY 300/t of domestic coke prices in China since October 1.

CoalMint assessed the latest price for met coke with 12.5% ash in North China at CNY 2,140/t ($327.84/t), up CNY 10/t ($3.31/t) on the week.

Strong domestic steel demand and higher coal and coke prices support Chinese imports

With China’s steel production running at record levels, steelmakers have been obliged to seek alternative coking coal supply, after Australian coal sales to China came under an informal ban.

While steel mills in China turned to countries such as Mongolia, Russia and Canada to source premium hard coking coal, the spot availability of alternative origins is low, forcing Chinese steelmakers to use more expensive domestic coking coals, thereby eroding their profit margins.

Alternative seaborne origins such as Canada, the US, Mozambique, Russia and Mongolia are mostly overbooked, or in short supply. Besides, it takes long time to ship coal from the Americas to northern China, which would result in late arrivals for Chinese buyers seeking spot cargoes to cover immediate restocking needs.

Furthermore, spot availability of coking coal from Russia and Mozambique is reportedly tight at present.

CNF China prices for met coke are currently assessed at $280/t (Poland), $275/t (Japan), $270/t (South Korea) and $265/t (Russia).

Chinese domestic coke prices underpinned by tight supply

In China, coke inventory has been on the decline since past 13 weeks in a row, which would exacerbate the supply-demand imbalance and warm up buoyant outlook.

Met coke supplies have tightened following the widespread implementation of governmental policies to phase out outdated coking capacity in China’s Shanxi and Henan provinces, giving rise to coking plants’ willingness to push up prices.

The supply tightness would last until late fourth quarter, amid replacement and reduction of coke capacity in China. Supported levels of steel production are expected to continue boosting coke demand and prices thereof.