- Coke prices to rise further on tight supply and production cuts
- Upside may ease amid weak steel demand, recovering coking coal supply
Uncertainties over China’s metallurgical coke market are likely to intensify in mid-to-late September, although prices are still expected to see further increases in the first half of the month. The major risk lies in a potential softening in coke demand if the downstream steel market fails to improve, which could trigger broader blast-furnace operating cuts, according to Mysteel’s monthly report.
The coke market’s upturn beginning in late August is poised to extend into early September, demonstrating a supply-driven market dynamic due to the lingering output cuts among coke producers grappling with deep losses, the report predicts.
August witnessed 10-30% output reductions at coking plants across China’s key coke-producing hubs, driven by an average loss of Yuan 106/tonne ($15.8/t) borne by the 30 independent coke producers that Mysteel surveys in the month.
The operation slowdown therefore dragged the combined daily met coke output of the 230 coking plants that Mysteel tracks to an average of 445,600 tonnes/day during August 20-26, 13% below the year-ago level and marking the lowest record since Mysteel first conducted the survey in December 2017.
Coke production in September is likely to recover mildly, as recent coke price hikes could slightly ease producers’ cash-flow pressures, while the anticipated peak season for steel consumption may also encourage some coking plants to lift operations.
However, the country’s overall coke supply landscape will largely remain tight this month, as persistent coking coal constraints will prevent any significant recovery in coke production. Meanwhile, coke operations cannot rebound swiftly in the near term, as resuming operations after deep production cuts will take time.
On the demand side, domestic steelmakers stepped up their coke purchases in the second half of last month, as intensifying coal supply concerns further threatened coke availability. This key shift in underlying fundamentals quickly drove met coke prices up by a cumulative Yuan 250-275/t over three consecutive hikes in late August, with a fourth hike set to take effect on Thursday and another expected in the first half of this month, according to Mysteel’s monthly report.
The sustainability of the recent uptrend — driven solely by supply contraction – could face greater uncertainty in the second half of this month. While the trend is likely to stabilize around mid-September, the subsequent outlook will still hinge on developments in the steel market, according to the report.
A major variable is coking coal supply, which could gradually climb out from its current trough as Mongolian coal shipments to Ganqimaodu in North China’s Inner Mongolia recover from recent lows and resume supplementing domestic supplies. This would curb further price surges in the feed coal and weaken cost support for coke, likely flattening the uptrend by mid-month.
The coke market outlook for late September, however, remains uncertain and will largely depend on the pace of steel demand recovery. While the subsiding summer heat is expected to boost construction activity and support finished steel sales, Mysteel cautions that steel mills may stay cautious about resuming production amid losses that are unlikely to ease quickly, potentially keeping coke demand under pressure.
The coke market faces two major risks, Mysteel’s monthly report warns: steel mills may deepen blast-furnace maintenance if peak-season steel demand underperforms, while persistent coke price hikes could prompt mills to slow purchases as their losses mount.
On the other hand, a steel market rebound — if it materializes — would coincide with a key restocking window in late September ahead of the National Day holiday over October 1-7 and could continue to lend some support to coke prices, a Mysteel analyst adds.
Note: This article is published as part of a content sharing agreement between Mysteel Global and BigMint.
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