CHINA COKE WRAP: Prices tumble after spring demand misses mark

China’s coke export prices have fallen amid the country’s weakening ferrous markets with demand not picking up as strongly as expected in the spring season.

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 $340-350 per tonne fob China for the week ended Tuesday March 20.

This is down $5-10 per tonne from $350-355 per tonne fob a week earlier, and $15 lower than the assessment of $355-365 per tonne fob a fortnight earlier.

While a cargo of 65% CSR product was heard to have been traded earlier this week to India at the equivalent price of around $350 per tonne fob China, such materials are now available at $340-345 per tonne fob, according to sources.

East China’s Rizhao Iron & Steel is cutting its purchase price for coke by 100 yuan ($15.80) per tonne - from Saturday March 24 onward, it will pay 1,800 yuan per tonne for materials with 57% CSR delivered to its facility. This is its third reduction since March 16, which takes the total to 200 yuan per tonne, after increasing it by 100 yuan per tonne earlier this month.

North China’s Hesteel, having not raised its prices after the Chinese New Year, has also trimmed its purchase price by 50 yuan per tonne. It has been paying 2,070 yuan per tonne for 65% CSR coke delivered to its facilities since Thursday March 22.

The two mills’ decision went against the expectations of some market participants who had anticipated several more rounds of coke price increases to take place after seeing them rise a couple of times earlier this month.

High inventory levels for coke have been weighing on prices for the steelmaking raw material.

A local information provider reported that a sample of 110 mills in China had 4.92 million tonnes of coke in their inventories on March 16. This works out to 10.46 days’ worth of production among mills in the north, and as high as 19.8 days for those in the east, according to an analyst at a futures company.

Inventory levels at the four major ports of Rizhao, Dongjiakou, Tianjin and Lianyungang continued to grow, and by Friday March 23 reached a total of 3.33 million tonnes. They breached the 3-million-tonne mark on March 9 for the first time at least since last year, according to a local data provider.

The increase was due to traders and mills actively stocking up before the Chinese New Year break in February on expectations of demand picking up after the holiday and upon the lifting of restrictions on blast furnaces and construction activities at the end of the winter heating season.

But downstream demand for steel has not picked up as strongly as expected, and as a result, many mills have continued to idle their blast furnaces.

In east China, rebar prices were at 3,500-3,580 yuan per tonne on Friday, down 13-14% from 4,080-4,120 yuan per tonne at the start of March.

Although north China’s steelmaking hub of Tangshan has already allowed local mills to operate their blast furnaces at 85-90% of capacity, compared with an average of just 50% during the winter, they may not ramp up to those rates until April, sources said.

Meanwhile, coke production, which also faced restrictions during the winter heating season, has now returned to normal rates, resulting in an oversupply at the moment.

The most-traded May coke futures contract on the Dalian Commodity Exchange closed at 1,852 yuan per tonne on Friday, down 9% from a closing price of 2,035 yuan per tonne two weeks earlier.

While mills are now less willing to pay as much for coke as they did before the Chinese New Year amid the sustained bearish sentiment in the market, some still believe prices will pick up once inventories are drawn down.

“Mid-April could be a turning point for the [declining coke] market,” a cokery source in north China told Metal Bulletin.

On the export front, mainstream markets have been largely quiet, which resulted in some sellers turning to more niche markets.

“It’s not a good time to buy because prices are weakening not only for Chinese coke, but also for Australian coking coal,” a Japanese source said.

Metal Bulletin’s fob Australia Premium Hard Coking Coal Index was at $206.58 per tonne on Friday, down 12.4% from a high of $235.84 per tonne on March 6.

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