CHINA COKE WRAP: Prices fall further on soft steel, coking coal markets [UPDATE]

Decreases in China’s domestic and export coke prices have not been halted, although some market participants had expected they would, because the steel markets have yet to gain momentum and coking coal prices are still weakening.

Metal Bulletin’s assessment of export prices for Chinese coke with 65% coke strength after reaction (CSR), 12.5% ash, and in physical sizes of 30-90mm, was $315-325 per tonne fob China for the week ended Tuesday April 10.

This was down by $5-10 per tonne from $325-330 per tonne fob in the preceding two weeks, and $25 lower than the assessment of $340-350 per tonne fob three weeks earlier.

Some market participants had estimated tradable prices for 65% CSR materials to be around $310 per tonne fob. One such cargo was even heard to have changed hands at an fob China equivalent of almost $300 per tonne, although this has yet to be confirmed by other sources.

East China’s Rizhao Iron & Steel trimmed its coke purchase prices by 50 yuan per tonne on Wednesday, and is now paying 1,700 yuan ($271) per tonne for materials with 57% CSR delivered to its facility. The mill has made five price cuts since mid-March, totaling 300 yuan per tonne.

Some market participants said that the latest price cut was beyond expectations, and it has yet to be accepted by cokeries, some of which have begun to make losses.

A number of major producers with total capacity for 40 million tonnes per year, in the country’s biggest coke-making province of Shanxi, were heard to have recently agreed to lower their production rate by at least 20% to help stabilize market prices.

A source at one of the cokeries told Metal Bulletin that it has cut production by 30%, and that the end-date for such measures “depends on the market.”

But coke inventories remain high at many mills, a trader in Beijing said. Continued government efforts to reduce pollution have played a significant role, he added.

For example, local authorities in Wu’an, in Hebei province, are said to have capped blast furnace utilization rates at 50% of capacity during the second quarter of 2018 at 10 of 14 mills in the city, while the remaining four will be subject to other restrictions.

China’s coke futures weakened again this week after brief rebounds in late March-early April. The most-traded September contract on the Dalian Commodity Exchange closed at 1,731.50 yuan per tonne at 3pm on Thursday, down by 4.2% from the close of 1,807 yuan per tonne on March 30.

The country’s steel market performance has also been lackluster recently. Rebar prices in the east slipped to 3,630-3,680 yuan per tonne on Thursday, compared with 3,700-3,740 yuan per tonne at the start of the month, although this was up from a nine-month low of 3,410-3,500 yuan per tonne on March 26.

A retreat in coking coal prices has undermined the cost support for coke as well.

Metal Bulletin’s fob Australia Premium Hard Coking Coal Index dropped back to $190.74 per tonne on Monday-Thursday, after a slight rise to $196.13 per tonne from $193.05 per tonne last week.

Prices for some domestic coking coal products in Shanxi were also heard to have fallen recently, to add up to a loss of 150 yuan per tonne after the Chinese new year in mid-February.

Japan and India remained the two principal destinations for Chinese coke exports (including semi coke) in February, accounting for 138,156 tonnes and 121,967 tonnes respectively, according to the latest Chinese customs data.

Turkey, South Africa and Vietnam followed, taking 84,065 tonnes, 66,579 tonnes and 54,118 tonnes, respectively.
China exported 0.94 million tonnes of coke and semi coke in March, more than doubling the 0.4 million tonnes shipped out a year earlier and 45.3% higher February’s exports, according to preliminary Chinese customs data released on Friday April 13. Exports for the first quarter totaled 2.27 million tonnes, up 13.4% year on year.

[This article was updated on Friday April 13 to include the latest Chinese customs data in the final paragraph.]