- Tight coal supply and resilient demand support coke price hikes
- Weak steel demand may limit further coke price gains
Chinese coke producers initiated the first round of metallurgical coke price hikes on August 18, injecting a bullish undertone into an otherwise stable domestic market.
Mysteel Coke Index (MCI) CDQ, which tracks China’s national dry-quenched quasi-first-grade met coke prices, remained unchanged from the previous session at Yuan 1,838.7/tonne ($272.7/t) on Tuesday, while the MCI CWQ for wet-quenched quasi-first-grade met coke also held steady at Yuan 1,695/t.
On Tuesday, coke producers in North China’s Hebei, Shanxi and Inner Mongolia announced increases of Yuan 50-55/t ($ 7-8/t) in their metallurgical coke selling prices, with the adjustments scheduled to take effect on Thursday. Elsewhere, a producer in Binzhou, East China’s Shandong province, proposed increases of Yuan 30-35/t ($ 4-5/t), effective from 9:30 a.m. on Tuesday. The moves marked the launch of the first round of met coke price hikes in China.
The proposed increases are still awaiting acceptance by steel mills, which traditionally hold the dominant position in China’s coke pricing negotiations.
The fresh round of price hikes comes after the domestic coke market endured three consecutive price cuts totaling Yuan 150-165/t ($ 20-25/t), with the third round fully implemented on August 7.
The prolonged decline pushed coking plants into widespread losses and production cuts, with the average loss among Mysteel’s 30 surveyed independent coking plants nationwide widening to Yuan 110/t as of last Thursday.
The latest price hike proposals are being underpinned by firm coking coal prices and the improved coke demand from steel mills, although weak steel transactions and squeezed steel margins could limit mills’ willingness to accept higher raw material prices.
Coking coal supply has remained tight as mine restarts since early August fell short of expectations, while additional production suspensions further tightened availability. At an auction held by a major coal miner in Inner Mongolia’s Qipanjing area yesterday, high-ash, medium-sulfur fat coal (A15% S1.1%) was traded Yuan 210/t ($ 31/t) higher at Yuan 1,420/t ($ 211/t), EXW with VAT.
On the demand side, relatively high hot metal output continues to provide support for coke consumption. Daily hot metal output among Mysteel’s 247 sampled integrated steel mills edged up by 1,700 tonnes on week to 2.38 million tonnes/day during August 7-13, suggesting tentative stabilization after a prolonged decline. Coke inventories at steel mills also continued to decline, and the ongoing destocking could eventually translate into restocking demand if steel margins show signs of improvement.
Sentiment also strengthened in the futures market, with the most-traded September coke contract on the Dalian Commodity Exchange closing Tuesday’s daytime session at Yuan 1,950/t ($ 290/t), up 1.38% from Monday’s settlement. The contract has now posted gains for three consecutive sessions, reaching its highest closing level since July 9.
At domestic portside market, Mysteel assessed wet–quenched quasi-first-grade coke and first-grade coke at Yuan 1,700/t and Yuan 1,800/t ex-stock Rizhao port, respectively, both up Yuan 20/t from the previous session and including VAT. The price of dry-quenched quasi-first-grade coke also rose Yuan 10/t to Yuan 1,920/t.
Looking ahead, firm coking coal costs, heavy losses at coking plants and relatively resilient coke demand should support the current round of price hike proposals. However, weak steel demand and squeezed steel margins are likely to keep mills cautious over procurement, making the sustainability of further coke price increases uncertain.
Note: This article has been published in accordance with a content exchange agreement between Mysteel Global and BigMint.
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