CHINA COKE WRAP: Prices rise further, caution increases

China’s domestic and export coke prices have continued to rise over the past two weeks, but resistance to further increases is growing.

Metal Bulletin’s price assessment for Chinese coke exports with 65% coke strength after reaction (CSR), 12.5% ash, 30-90mm, was $350-360 per tonne fob China for the week ending Tuesday June 12.

The range is the same as that for the preceding week, but up $10 per tonne from $340-350 per tonne two weeks earlier.

Although offers were high as $370 per tonne fob this week – on the back of another 100 yuan per tonne price hike in China’s domestic market late last week – no deals have been confirmed to support the level.

Only one deal has been confirmed in the past fortnight, involving a cargo of 65% CSR materials to Southeast Asia at $340 per tonne fob China.

Export prices above $350 per tonne fob do not tend to lead to transactions at the moment, sources said.

Last Friday, north China’s Hesteel raised its coke purchase price for the sixth time since May, increasing it by 100 yuan per tonne to bring the total rise since May to 500 yuan per tonne. It is now paying 2,370 yuan ($370) per tonne for materials with 65% CSR delivered to its facilities.

East China’s Rizhao Iron & Steel also hiked its coke purchase price for the seventh time since May – by 100 yuan per tonne – on June 8, bringing its total increase since May to 550 yuan per tonne. It is now paying 2,250 yuan per tonne for materials with 57% CSR delivered to its facility.

Cokeries in Shandong, Shanxi and Hebei provinces are proposing an eighth round of increases from Saturday June 16, according to market participants, adding another 100 yuan per tonne to push the total increases to 650 yuan per tonne.

While some market participants believe the latest round of hikes will be accepted without much resistance, others are foreseeing bigger downside risks with prices surging to historical highs.

“Although coke inventories are quite low at cokeries and mills, port stockpiles remained relatively high,” an international trading source said.

Coke stocks at four major Chinese ports – Rizhao, Qingdao, Tianjin and Lianyungang – totaled 3.42 million tonnes on Friday June 15, according to a local data provider. This is down from a peak of 3.86 million tonnes three weeks earlier, but still more than 1 million tonnes higher than June 2017’s 2.3 million tonnes.

“Port prices have been lower than some ex-cokery prices, so traders have no incentive to get materials to ports for selling, thus contributing to the recent fall in port stockpiles,” a cokery source in Shanxi told Metal Bulletin.

Another cokery source in north China complained that traders with lower-cost stocks have been pulling down market prices.

“The coke market is less likely to tumble in the near term given [the]  good downstream steel demand, but there are some negative factors to watch,” the Shanxi source said.

With the closure of the 18th summit of the Shanghai Cooperation Organization on June 9-10 in Qingdao city of east China’s Shandong province, cokeries that were earlier asked to trim production have returned to full capacity.

There have also been market expectations for cokeries in east China’s Xuzhou city to resume operations around the end of June, after production came to a complete standstill early in May.

The country produced 36.48 million tonnes of coke in May, down 1.6% on the year and 0.7% lower month on month, according to the National Bureau of Statistics. Output totaled 175.96 million tonnes in the first five months of the year, 2.9% lower than a year earlier.

China exported 838,000 tonnes of coke and semi coke last month, up 28.9% year on year and 3.1% higher month on month, according to preliminary Chinese customs data.

Exports totaled 3.87 million tonnes in the first five months of 2018, up 13.9% compared with the same period last year.

[Editor’s note: The eighth paragraph of this article had erroneously stated that Rizhao Steel had raised its coke purchase price by $100 per tonne on June 8. The steelmaker had in fact raised its price by 100 yuan per tonne. This has been corrected.]