CHINA COKE WRAP: Domestic price surge closes door for exports

The continuing surge in China’s domestic coke prices has further restricted the capacity for exports, Metal Bulletin has learnt.

Export trading activity has been quite limited in the past fortnight, amid two more rounds of coke price rises, which have sent offers up to as much as $350 per tonne fob for shipments with a coke strength after reaction (CSR) of 65%.

Metal Bulletin’s price assessment for coke cargoes with 65% CSR, 12.50% ash, and in physical sizes of 30-90mm was $325-340 per tonne fob on Tuesday August 22.

This was up by $20-25 per tonne week-on-week, and was $25-35 per tonne higher than $300-305 per tonne fob two weeks earlier.

China’s domestic coke market experienced the sixth and seventh round of price rises last week and this week, up by 80 yuan per tonne and by 100 yuan per tonne respectively. Gains have now added up to 460 yuan ($69) per tonne since late June.

Rizhao Iron & Steel in East China’s Shandong province took the lead among its peers to raise the purchase prices with effect from Thursday onward. It is now paying 2,230 yuan ($335) per tonne for coke with no less than 65% CSR delivered to its facility.

North Chinese steel major Hesteel was heard to be raising its purchase prices by a similar amount from Friday, and is now paying 2,220 yuan per tonne for such materials.

Against the backdrop of strong profitability and the resulting affordability of costly raw materials, a cokery source in Hebei province attributed the accelerating price increase mainly to “supply issues”, especially in Shandong, where factories face strict inspection of their emissions.

Shandong mills buy coke from Hebei and Shanxi, the latter of which is also seeing some production restrictions, so more volumes may be sought from Hebei, he added.

“The coke market is generally in a tight corner amid serious production cuts,” he said.

The country’s most-traded January coke futures contract on the Dalian Commodity Exchange ended at 2,474 yuan per tonne on Friday, 14.2% higher than the close of 2,166 yuan per tonne a fortnight earlier.

It hit a high of 2,487 yuan per tonne during the session, the highest since May 2011.

While exporters found it hard to accommodate the rapidly rising prices, overseas buyers have also been deterred. India and Japan, the top two customers for Chinese coke, are now sourcing material from Colombia, Poland and Russia, a trader in Singapore told Metal Bulletin.

Russia, which used to export the fuel and then stopped doing so for years, is now coming back to the market as Chinese materials are getting “too costly”, he added.

Japan is actually self-sufficient in coke now, according to a local mill source, thanks to “refabrication”, with its 40- to 50-year-old cokeries fixed and new ones being built.

The source added that the mill would increase self-supply of coke by some 1 million tpy.

It is difficult for Indian consumers to afford Chinese coke right now, as it is significantly more expensive than their domestic supply, participants said.

With the freight cost from China to India rising to $20 per tonne from $15 per tonne, the fob China price of $335-340 per tonne would be equivalent to almost $360 per tonne cfr India, with the further additions of the $25.20 per tonne anti-dumping duty and 5% import tax to be considered, a second trader in Singapore said.

In comparison, offers from Russia, Colombia and Japan cost just $355 per tonne cfr India, and without the anti-dumping duty, he added.

A domestic cokery source in India told Metal Bulletin that it was selling its products at $350-355 per tonne, but was hoping to increase its price soon as well.

“Market availability is a problem,” he said, adding that few cargoes of non-Chinese coke can be secured at the moment.

The cokery is also raising production by 5-7% in the coming month to make the most of the market, he added.

Indian consumers are not desperate to buy, as they have sufficient material until September-October, a third trader in Singapore told Metal Bulletin.

However, some local mills that normally take Chinese coke may still have to accept the current prices, and may even build up their stocks because of expectations of a supply shortage in winter, he said.

India therefore remained the principal destination for Chinese coke in July, while South Africa took over from Japan to rank second.

India accounted for 166,901 tonnes of China’s coke exports last month, down by 54.6% year-on-year, according to the latest Chinese customs data.

Volumes of 83,022 tonnes and 65,518 tonnes were bound for South Africa and Japan, down by 44.5% and 65.8% on the year, respectively, the data showed.

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