Chinese metallurgical coke market remained mired in weakness despite a recent recovery in downstream steel prices.
Coke companies maintained low-level output amid an expectation of deteriorating negative margins, opting to prolong production constraints in a bid to minimize risks after multiple rounds of price cuts.
“We have increased production restrictions to nearly 40% with low inventory pressure. However, relatively high coke-making costs have led to a loss of over 100 yuan/t due to the slow decline in coking coal prices in the surrounding production areas,” said one Shaanxi-based coke producer.
Steel mills, burdened by persistent losses and tepid steel consumption, pressed for reductions in coke prices for the sixth time on March 19, taking the total decline to 600-660 yuan/t so far this year.
As steel prices showed signs of recovery, investors and traders, enticed by the potential gains, have turned their attention to the crucial steelmaking material. Data showed the price of Shanghai HRB 400 rebar (20 mm) stood at 3,560 yuan/t on March 19, up 40 yuan/t from a day ago, while Shanghai hot-rolled coil (3.0 mm) rose 70 yuan/t day on day to 3,910 yuan/t.
However, the sustainability of rebounding steel demand remains to be seen in downstream sectors such as construction activities, not enough to inject upside momentum into the market.
Meanwhile, most steelmakers still sidelined their procurement and showed few signs of resumption of blast furnaces. Molten iron output continued to trend lower, while coke stocks remained relatively high at mills as coke makers quickened their sales amid a continuously weak market outlook.
“We choose a prudent attitude and sell neither coking coal nor coke recently as markets extend a downward trajectory,” one Shandong-based trader told Sxcoal.
Prices of crucial coke-making material-coking coal-continued to fall, mitigating the cost support for the coke market. This also prompted steel firms to request coke price drops, and the sixth round materialized on March 20. Some participants even predicted further price corrections in the foreseeable future.
One large steelmaker in northern China’s Hebei province adjusted down purchase prices for Grade I wet-quenching coke by 100 yuan/t to 2,010 yuan/t, and Grade I dry-quenching coke by 110 yuan/t to 2,285 yuan/t, delivered basis with VAT and on banker’s draft.
In Shandong, the new prices for Grade I wet-quenching coke fell to 1,770 yuan/t for coke suppliers inside the province, and 1,780 yuan/t for those outside the province. The Grade I dry-quenching coke decreased to 2,100 yuan/t, delivered basis with VAT and on banker’s draft.
Note: This article has been exchanged under the article exchange agreement between CoalMint and SX Coal.