CHINA COKE WRAP: Prices slip, but downside limited

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 $360-365 per tonne fob China for the week ended January 9.

This was down from $365-370 per tonne fob in the preceding week, and $10-15 per tonne lower than $370-380 per tonne fob seen a fortnight earlier, which was one of the highest levels since Metal Bulletin started publishing the assessment in March 2015.

With no confirmed deals heard in the past two weeks, offers have been made at prices as low as $360 per tonne fob, especially from traders hurrying to cash in on their cargoes before the Chinese New Year in mid-February, according to market sources.

A similar reversal took place in China’s domestic market, with some traders heard cutting offers at ports earlier last week, while major mills have lowered their purchase prices later.

North China’s Hesteel has reportedly cut its purchase price for coke with 65% CSR delivered to its facilities by 50 yuan per tonne, and is paying 2,420 yuan ($371) per tonne from Wednesday onward. The mill increased its purchase price by a total of 570 yuan per tonne last month.

East China’s Rizhao Iron & Steel also trimmed its coke purchase prices by a similar amount last Saturday. It raised prices by a total of 750 yuan per tonne in December.

A loosening in cokery production restrictions and a plunge in China’s steel market are believed to have triggered the coke price falls.

While production cuts imposed on coke plants in northern China generally intensified for most of December, local media reported late in the month that the biggest coke producing province of Shanxi had suggested that a number of local cokeries run at full capacity.

This was meant to increase output of coke oven gas, a by-product in coke production, to alleviate tightness in the country’s supply of natural gas, which was earlier nominated to replace thermal coal as the fuel for winter heating in the northern part of the country.

Other northern provinces may be making similar encouragements, a trader in Beijing told Metal Bulletin.

While more coke was stockpiled at cokeries as a result, shrinking steel prices and margins were prompting mills to squeeze raw materials costs.

East China’s rebar prices, for example, have tumbled by more than 21% from almost 5,000 yuan per tonne early in December to 3,830-3,920 yuan per tonne as of Wednesday.

However, mills are likely to remain active in restocking raw materials because they could still be earning 700-800 yuan for per tonne of steel, while snowfalls in north China have been providing support to coke prices.

Domestic coke delivery is typically by truck from Shanxi to peripheral steelmaking provinces. Snow could lead to slowdowns or even blockages of roads and expressways.

Therefore, some market participants expected relatively limited downside in the weeks to come.

Among major coke export destinations, Japan is heard to still have pockets of demand for February cargoes, while current prices could remain unrealistic for Indian buyers despite a local steel market recovery.

Little demand has been heard from Vietnam either, with an indicative bid given at only $330 per tonne fob China for 65% CSR materials.