Chinese Met Coke Import Offers Wane on Subdued Demand

Seaborne metallurgical coke import offers from China have plunged as deep as by $10/mt, due to winter production cuts, stricter controls on sintering process and a lull period as year-end approaches, resulting in a lackluster demand for met coke.

Meanwhile, Indian buyers are expected to return if coke prices continue to weaken.

In China, the acceptance of price cuts for domestic coke may generate buying interest from the international market.

Recently, incentive of coal production in Shanxi is relatively low with individual coal mines having gone for holiday due to the completion of annual tasks. The weakened supply of coking coal has played certain supporting role for the price, and coke enterprises still have replenishment demand for winter storage, resulting in a relatively strong coking coal that is hard to be suppressed. It is expected that the spot price of coking coal in the short term will remain stable, though some high-priced resources are still expected to be lowered.

Presently, the coke market as a whole is in weak stabilization. With the increasing number of steel mills proposing price cuts, the short sentiment is strong. Facing with the suppression of coke prices by some steel mills in Hebei and Shandong, some coking plants have agreed to lower offers; however, some coking is still in the duet game. In the short term, steel mills hold a firm stance. In terms of ports, the low-priced tradable goods increased. At Rizhao Port in Shandong province, the Quasi-primary coke is offered at RMB 2,200/ton with mainstream cash offers at RMB 2,200-2,300 FOB, including tax. Recently, some steel mills in Tangshan, North China, are in blast furnaces maintenance due to weakly fluctuating steel prices. In the short term, coke is facing high probability to be in a downward track. In comparison, coking coal is temporarily stable. Recently, incentive of coal production in Shanxi is relatively low with individual coal mines having gone for holiday due to the completion of annual tasks. The weakened supply of coking coal has played certain supporting role for the price, and coke enterprises still have replenishment demand for winter storage, resulting in a relatively strong coking coal that is hard to be suppressed. It is expected that the spot price of coking coal in the short term will remain stable, though some high-priced resources are still expected to be lowered.

As of 27 Dec’18, primary metallurgical coke is at RMB1,950/ton in Luliang, Shanxi province a week-on-week decline of RMB 100/ton, and a month-on-month decrease of RMB 410/ton; quasi-primary metallurgical coke in Tangshan, Hebei province is at RMB 2,210/ton, a week-on-week decline of RMB 100/ton, and a month-on-month decrease of RMB 390/ton; primary metallurgical coke at Rizhao Port reported at RMB 2,250/ton, a week-on-week decrease of RMB 20/ton, a and month-on-month decrease of RMB 350/ton.

The coke enterprises in the producing area have successively implemented a new round of price cut proposed by the steel mills. The wet quenching coke has dropped by RMB 100/ton while the dry quenching coke dropped by RMB 110-130/ton. The current situation is that coke supply end is relatively guaranteed, while the demand side is in tight finance at the end of the year with a weak market and trade demand. Moreover, the off-season maintenance of the blast furnace combined the requirement of environmental protection and production limit, the rigid demand for coke is decreasing. Overall, the current coke supply environment is loose, and coke market is difficult to improve in the short term.

One coke enterprise from Lvliang of Shanxi province said that their quasi-primary coke (A12.5 S0.65 CSR60) was at RMB2,050 /ton,ex-factory.

A coke enterprise in Inner Mongolia said that the secondary coke (A13 S0.8 CSR58) was at RMB 1,700/ton,ex-factory acceptance.

A coke enterprise in Henan province said that the quasi-primary dry quenched coke (A13 S0.7 CSR60) was at RMb2,250 / ton,ex-factory acceptance.

A coke enterprise from Changzhi of Shanxi province said that the primary coke (A13 S0.7 CSR60) was at RMb2,170 / ton.

On 27 Dec’18, the spot market of coke in the region was weak. For the fifth round of price cut proposed by steel mills, the coke enterprises were successively implementing it. The current secondary coke reported at RMB 2,000-2,020 /ton, and the quasi-primary coke reported at RMB 2,050-2,070/ton, all ex-factory, acceptance including tax prices.

In addition, coke market in East China recently is weak, and the market sentiment is floppy. Since the 26th, with the purchase price of coke by a steel mill in Shandong lowered by RMB 100/ton, the coke price in East China has been officially lowered. Take the Shandong market as an example. The current secondary coke is RMB 2,040-2,100 /ton, and the quasi-primary is reported at RMB 2,100-2,150/ton, all ex-factory including tax prices. At present, the pattern of supply and demand in East China is still dominated by balance. There is no pressure on sales of coke enterprises. The steel mills in southeastern China even have some demand for winter storage. This round of price adjustment is mostly affected by other markets, particularly the recent production limit of steel mills in the Hebei market, which reduced the overall market demand. In addition, the current steel market is lightly traded, steel prices fluctuate, and steel mills are still demanding lower raw material costs. In addition, the port price fell as trade volume decreased as a result of traders temporarily suspending the purchase of goods, and the market bearish sentiment was strong. In addition, the other markets have stepped up efforts to reduce stocks so that they can clear out it at the end of the year. The recent arrival of coke at East China Steel Plant has been smooth, leading to accumulated inventory within plants. This has aggravated the bearish mentality of the overall coke market in East China. Hence the coke in the short term lacks strong support and is likely to continue to decline.