- Steelmakers eye fresh met coke price cuts amid weak demand
- Falling coal costs erode producer leverage, market sentiment negative
Mysteel Global: Rumours about new price cuts circulated in the Chinese metallurgical coke market on December 16, as steelmakers expected that their demand for the raw material would continue faltering in the near term. Meanwhile, sluggish support from the cost front further clouded the market outlook.
On Tuesday, talks spread across the market that domestic steelmakers may attempt another round of cuts on met coke purchasing prices around this Friday, indicating mills’ determination to drive down costs for raw materials, according to market sources.
Since late November, steel mills had pressured coke producers to accept two rounds of price cuts totalling RMB 100-110/tonne ($14.2-15.6/t), as reported.
Expectations of softer demand may encourage steelmakers to push for further coke price cuts in the short run, as their hot metal production is likely to decline further amid the stricter environmental protection moves in many cities across the country.
According to sources, authorities in Handan city, North China’s Hebei province, had required local steelmakers to slow production since last Sunday in order to improve air quality. By Tuesday, operations at three blast furnaces in the city had reportedly been halted, idling a combined capacity of 15,000 tonnes/day (t/d). Meanwhile, a fourth blast furnace is expected to start maintenance soon, trimming the local hot metal output by another 5,000 t/d, sources noted.
While demand pressures continued weighing on the met coke market, possible support from the cost front had weakened further. Despite price rebounds in some coking coal types, the general downtrend in domestic coal prices persisted yesterday, with Mysteel’s assessment of the national composite coking coal price dropping another RMB 2.7/t on day to RMB 1,293/t including the 13% VAT as of December 16.
As such, sentiment in the coke market remained negative yesterday, with most participants believing that coke producers lack strong leverages to resist steelmakers’ possible price cut proposals, sources reported.
Yesterday, Mysteel’s assessment of China’s quasi-first-grade met coke prices, for wet-quenching and dry-quenching types respectively, stayed unchanged from the previous session at RMB 1,485.4/t and RMB 1,620.7/t with VAT.
In the futures market, prices stayed rangebound yesterday as players waited for a clearer market direction. On the Dalian Commodity Exchange, the most-traded met coke contract for next May delivery edged up by 0.5% from Monday’s settlement price to end Tuesday’s daytime trading session at RMB 1,670/t.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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