- Chinese coke prices may rise amid recovering demand
- High inventories, weak coal gains limit sharp rebound
Mysteel Global: Chinese prices of metallurgical coke are predicted to rise modestly throughout April, mainly underpinned by a gradual recovery in demand from steelmakers, according to Mysteel’s latest monthly outlook.
The prediction takes account of rising consumption of met coke among steel producers, many of whom have begun to step up procurement and restocking efforts, the report noted. The recent improvement in steel demand has also helped lift mill margins slightly, potentially allowing more flexibility to absorb higher raw material costs.
Coke producers are expected to seize on this demand recovery to push for price hikes in the near term. Since October last year, they have endured 11 straight rounds of price cuts imposed by steelmakers, each trimming prices by Yuan 50-55/tonne ($6.8-7.5/t), as reported.
By March 31, China’s national composite coke price under Mysteel’s assessment had fallen by Yuan 65.8./t from February 28 to Yuan 1,296.8/t including the 13% VAT.
Throughout March, steelmakers came under heavy financial pressure as the anticipated seasonal recovery in construction activity in spring still fell short of market expectations. Domestic steel demand stayed subdued, while export challenges – compounded by trade cases launched abroad – further compressed their profit margins. This also drove many mills to adopt low-inventory strategies as a way to preserve profitability and trim input costs.
However, the report suggests that some signs of recovery in coke demand will emerge this month. Hot metal output is expected to rise steadily in coming weeks, which should translate into higher consumption of coke and provide at least a floor for prices.
For example, the combined daily hot metal output among the 247 mills nationwide under Mysteel’s tracking averaged 2.37 million tonnes/day during March 21-27, up by a large 93,400 t/d from a month earlier.
In addition, the country’s Qingming Festival holiday (April 4-6) may open a window for coke producers to leverage restocking needs from steelmakers – potentially offering the coke makers a chance to raise their sales prices.
Still, the report remains cautious about the scale of any rebound. It suggests that any upward movement will likely be measured rather than aggressive, with current expectations centred on one or two rounds of modest coke-price hikes this month.
The still-high coke inventories and only small gains in coking coal prices remain key factors restraining a substantial rebound in spot coke prices, the report notes. Ultimately, only a significant improvement in supply-demand fundamentals can drive a sustained turnaround in prices, it observes. Without that, any upward push fueled by futures market rallies or policy stimulus measures from Beijing is likely to prove short-lived.
As of March 27, the total coke inventories held by the 247 Chinese steel mills Mysteel monitors nationwide stood at 6.68 million tonnes, much higher than the 5.95 million tonnes they were nursing on the same day last year.
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