CHINA COKE WRAP: Upward price momentum fades, official policy will set tone

China’s domestic and export coke prices have largely been levelling off after another jump in the past fortnight, while market participants wait for more certainty on the government’s policy for production restrictions.

Offer prices this week have largely hovered around $370-380 per tonne fob China for cargoes with a coke strength after reaction (CSR) of 65%. This was after a 50,000-tonne shipment to be loaded in October was heard traded at $380 per tonne fob, bound for Europe.

Metal Bulletin’s price assessment for coke shipments with 65% CSR, 12.5% ash, and in physical sizes of 30-90mm, was $370-380 per tonne fob on Tuesday September 19. This was the highest level since its launch in March 2015.

This price was up by $20 per tonne from the $350-360 per tonne fob recorded two weeks ago, but was the same as a week earlier.

A 10,000-tonne cargo of 50% CSR coke (13.5% ash, 0.85% sulphur), laycan in mid-October, was heard traded to Southeast Asia at $360 per tonne fob in the middle of this week.

Domestic market
China’s domestic metallurgical coke market experienced a ninth round of price increases last week, with the representative steelmakers of Rizhao Iron & Steel in the east and Hesteel in the north raising their purchase prices by another 100 yuan ($15) per tonne.

The nine rises since late June, which add up to 660 yuan per tonne, have pushed up the price Hesteel pays for 65% CSR coke, delivered to its facilities, to 2,420 yuan ($368) per tonne.

Some coke producers in Shanxi and Henan provinces reportedly proposed a tenth price rise of a further 100 yuan per tonne this week.

However, a major cokery in Hebei province, which was at first heard to be planning to raise its price by at least 100 yuan per tonne this week, has now postponed this action to next week, according to market sources.

“The timing of this looks a bit difficult, and we will see how much [of a price rise] will finally be accepted,” a source at the cokery told Metal Bulletin.

China’s ferrous futures and physical markets have generally been weakening in the past fortnight, with the benchmark January coke contract on the Dalian Commodity Exchange ending at 2,032 yuan per tonne on Friday. This was down by 17.7% from the market close of 2,468 yuan per tonne on September 12.

This has led some stockists to “dump cargoes” at ports, including those which took physical delivery of the September coke futures contract, sources said.

Spot coke prices “cannot rise all the time” and they may already have gone too far, they added.

After the latest round of increases this month, coke prices should be stable in October, the cokery source reckoned, because cokeries in Beijing, Tianjin and another 26 nearby cities in Hebei, Shanxi, Henan and Shandong provinces will start to cut production. Meanwhile, restrictions on blast furnaces in the same cities will only begin on November 15.

Only four cities in Shanxi – Taiyuan, Yangquan, Changzhi and Jincheng – were involved in the initiative. These have total coke production capacity for about 10 million tpy, compared with more than 100 million tpy in the whole of the country’s biggest coke-producing province, the cokery source added.

The more significant effect on the market more will result from how the provincial government requires local cokeries to control production during the coming months, he said.

Detailed plans for this have been issued by Hebei and Henan provinces, and will give the coke market a boost once they are published, but until that time their absence will be negative for the market, he added.

“It is hard to judge market direction without [seeing] the policies. But there will surely be production cuts in Shanxi next month – it is only a matter of time and duration,” another coke producer source in Hebei said.

Export buyers
Demand for Chinese coke has been heard recently from major markets, but India remains a difficult destination.

While price offers were received at $390 per tonne fob China or higher for 65% CSR coke, a more reasonable price for some buyers may be $360 per tonne fob, a European buyer source told Metal Bulletin earlier this week.

Enquires from Japan have appeared in the market again, with bidding for 62% CSR materials at around $350 per tonne fob, according to market sources.

For Indian buyers, even a competitive offer of $370 per tonne fob China for 65% CSR coke is well beyond their acceptable price of $350 per tonne cfr, even without any additional duty costs, market participants said.

However, offers of such materials produced in Colombia and Japan were also around $390 per tonne cfr India, similar to the prices for Chinese products, a local source told Metal Bulletin.

“The prices are too high and Indian consumers are not going to buy. They would just take small volumes, domestically,” he said.

Indian steelmakers can make a profit of $30-40 per tonne of steel based on the coke supply they secured two or three months ago at $310-320 per tonne fob China, he added. So they would incur losses if they were to source Chinese coke at the current prices.
 

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