China: Met coke prices expected to weaken in Jan'25

• Shrinking steel margins pressure coke demand
  
  
• Ample availability of coke to limit price support
  
  

Mysteel Global: Chinese prices of metallurgical coke are forecast to decline further during the remainder of this month, Mysteel predicts in its monthly outlook report on the commodity. A likely fall in hot metal output among domestic steelmakers, in response to shrinking steel margins, is expected to restrain their coke demand in tandem.

On 27 December, leading steelmakers in North China's Hebei and East China's Shandong pressured independent coke producers to accept a price cut of RMB 50-55/tonne (t) ($6.9-7.6/t). This marked the fifth consecutive reduction since last October and ended nearly a month of price stability.

As of 31 December, China's national composite coke price under Mysteel's assessment had dropped by RMB 55.5/t from a month earlier to settle at RMB 1,645.3/t, including VAT.

As for the market trend at the start of the year, the report suggests that prices look set to fall further while a sixth consecutive cut remains a strong possibility.

The forecast hinges primarily on the continued decline in coking coal prices, which has eroded any upward momentum for coke. Moreover, expected cuts in hot metal output at some steel mills are likely to further weigh on coke prices.

In fact, many domestic steelmakers have already responded to shrinking steel margins by conducting maintenance and scaling back steel production. During 27 December-2 January, daily hot metal production among the 247 blast-furnace (BF) steelmakers Mysteel canvasses plunged to some 2.25 million tonnes (mnt), down by a large 74,100 t from a month earlier.

On the supply side, domestic coke makers are also likely to reduce production to some extent, primarily in response to pollution abatement directives issued by local governments or to curb their losses on sales. However, as their coke inventories have been steadily building, any sharp drop in supply is unlikely in the near term. Consequently, any support for coke prices from the supply side seems negligible too.

While coke tags this month remain under short-term downward pressure, the report cautiously predicts that January may only see one additional price cut.

As the Chinese New Year (over 28 January-4 February) draws near, coal mines are expected to gradually halt operations, potentially curbing the steady decline in coking coal prices. Any temporary stabilisation of coal prices ahead of the holiday could provide some cost support for coke tags.

Moreover, daily hot metal production will largely hold stable at around 2.25 mnt this month, and a significant decline is unlikely. Steel mills earning reasonable profit margins are expected to maintain stable production, which should ensure that their need for feed coke remains normal. This should provide some resilience to coke prices.

As of 2 January, about 48% of the 247 BF steel mills said they were earning profits on sales, down by 1.73 percentage points from a month ago. This implies that around 118 BF steel mills last week were making some money when selling finished steel.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.