中文
China's met coke market has been relatively stable after the Chinese New Year holidays, with proposals by either steel mills to further lower prices or coke makers more recently to raise prices failing to materialize so far.
Behind the flatness is a prolonged tug of war between coke and steel makers over the near-term market prospect, which however would be greatly affected by changing dynamics and mentality of consideration as to their respective operations.
It seems the coke market may be less likely to repeat fast ups and downs as seen in late last year, should improvements in the steel market fall below expectations and thus less effect spread into the coke and coking coal markets. This has been what is observed in the post-holiday market so far and may remain so in the near future.
Chinese coke producers proposed a 100-110 yuan/t hike in late February, against steel makers' third cut of the same in late January after two rounds of drops totaling 200-220 yuan/t. There are several factors that have contributed to the still pending hike after more than two weeks of tussle.
Despite thin profit/loss or merely breakeven, coking plants generally maintain high operation, instead of slashing production greatly, a move generally made when the loss exceeds 200 yuan/t.
This is due to several considerations: 1) production reduction raises costs and worsens losses, while certain level of operation can dilute cost; 2) smooth coke sales, owing to low stocks at most coke and some steel plants, present hope for a better outlook; 3) decline of coking coal prices helps repair profit; and 4) inelastic demand from steel mills.
Coking coal prices have been on the decrease, albeit at small rates, since the end of the Chinese New Year holidays, even after the recent mining accidents that had only a limited impact on mine operations in the top coal hub of Shanxi.
There are also several factors behind: 1) delayed hike of coke prices weakens coking coal prices; 2) high level of mine operations increases supplies to the market, except for premium coking coal that is still in shortage; 3) time lag in the positive effect from improved operation/profit at mills; and 4) increased online auction failures and price drops.
However, we are still expected to see potentially favorable changes in the steel market. Nearly all of the steel products are now above 4,000 yuan/t and mills could enjoy an averagely 100 yuan/t-plus profit.
Demand for steel products has shown signs of pickup and an anticipated boom in construction activities is still possible. Such changes will definitely be good news for the coke market, and even the coking coal market.
We have invited industry veterans and experts to share insights on the upcoming Global Coking Coal Market Summit over Mar 29-30 in Taiyuan, the capital city of China’s top coking coal base Shanxi province. Join us for more discussions on the market.
(Writing by Emma Yang Editing by Harry Huo)
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