CHINA COKE WRAP: Export window remains closed as domestic price soars, yuan appreciates

A stronger domestic market and the improving value of the yuan have continued to limit opportunities for coke exports, sources told Metal Bulletin this week.

Current offer levels for cargoes with a coke strength after reaction (CSR) of 65% were at least $360-370 per tonne fob China, market participants said on Tuesday September 5.

In the past few weeks, cargoes bound for India had transacted at $310 per tonne fob China while those sold to Europe changed hands at $320 per tonne fob China, they added.

Metal Bulletin’s price assessment for coke shipments with 65% CSR, 12.50% ash, and in physical sizes of 30-90mm was $350-360 per tonne fob on Tuesday, the highest since its inception in March 2015.

This was up $10-15 per tonne from last week, and up $20-25 per tonne from the $325-340 per tonne fob posted two weeks ago.

China’s domestic metallurgical coke market continued with its pace of a hike in about every 10 days since late June, experiencing the eighth round of increases earlier this week.

Rizhao Iron & Steel in the east and Hesteel in the north both raised their purchase prices for the blast furnace feed by 100 yuan ($15) per tonne, effective from Monday onwards.

Adding up to 560 yuan per tonne, the eight rounds have reflected coke supply tightness amid coking operation restrictions, as well as the handsome profitability and high production rates at Chinese mills.

From October 1, 2017, to March 31, 2018, cokeries in Beijing, Tianjin and other 26 surrounding cities in Hebei, Shanxi, Henan, and Shandong provinces will have to extend coke production time to more than 36 hours, and for those in urban areas the time will be at least 48 hours, according to an action plan to tackle air pollution in the coming winter period.

This could cut a total of 18 million tonnes of coke supply in the whole area over the six month period, according to estimates by a local information provider.

A ninth round of coke price rise is on the way and is likely to land next week, sources told Metal Bulletin.

The domestic market is so buoyant that some export traders simply turned to sell within China.

“Overseas buyers just can’t afford current prices, and I think Chinese coke exports may stay restrained in the coming six-to-twelve months,” an export trader said.

Worsening the affordability is the spike in the exchange rate between the yuan and the US dollar, which has come to 6.50 yuan per $1 from 6.66 yuan per $1 two weeks ago.

While the current price of around 2,400 yuan per tonne for 65% CSR coke at Chinese port would cost $360 per tonne given the rate of 6.66 yuan to $1, it is now costing almost $370 per tonne.

Indian buyers are less likely to accept prices above $310-315 per tonne fob China, when they are receiving offers of $330-350 per tonne cfr India for Japanese, Australian and Colombian coke, according to sources.

“[In contrast] to the lucrative Chinese mills, Indian steelmakers have been quite financially stressed, so the soaring costs of Chinese coke are out of the question,” an Indian trading source told Metal Bulletin.

Additionally, Indian consumers are covered until the end of October after earlier restocking, so they may wait at least until later this month to look for cargoes, a trader in Singapore said.

“But they will need to buy at some stage,” he said.

China exported 460,000 tonnes of coke in August, down 55.80% year on year and 36.10% month on month, according to the country’s preliminary customs data released on Friday.

In the first eight months, coke exports totalled 5.28 million tonnes, 22.4% lower than a year earlier, according to the customs data.