China: Weekly coal and coke market highlights

Chinese domestic metallurgical coke prices remained mostly stable during this week as coking plants and steel mills were locked in dilemma following a fifth round of price hike.

At present, Chinese coking plants are more willing to maintain high operating rates on account of decent profit margins; smooth sales and buoyant market outlook.

Meanwhile, coal importers in China have turned away from the seaborne market following the widespread rumor on the country's possible ban on Australian coal imports.

The rumor, having emerged in the Chinese market after the National Day holidays over October 1-8, stated that some domestic power plants and steel mills had been orally notified of temporarily suspending Australian coal imports, without any tentative date mentioned regarding the termination of the initiative.

Chinese steelmakers are presently showing no urgency to procure seaborne material despite several cargoes waiting to be sold as port stocks. Instead, majority of the steelmakers prefer to wait for port related matters to ease.

Although it is difficult to substitute Australian premium hard coking coal, Chinese steelmakers have multiple alternative seaborne origins for sourcing met coke such as Poland, Japan, South Korea and Russia.

CNF China prices for met coke are currently assessed at $275/t (Poland), $270/t (Japan), $265/t (South Korea) and $263/t (Russia).

Chinese domestic met coke prices continue uptrend on coking coal shortage

In consideration of the restrictions on Australian coal imports, many Chinese steel mills have expressed concerns that met coke prices would increase due to shortage of coking coal supply, thereby squeezing steel margins.

Coking coal supply tightness, coupled with de-capacity and replacement measures, have already pushed up the country's met coke export prices to such high levels which are incompetent against other exporting nations.

CoalMint assessed the latest price for met coke with 12.5% ash in North China at CNY 2,110/t ($325/t FOB China), up CNY 50/t ($11.3/t) on the week.

Chinese steel mills fear that coke producers might propose another round of price hike in the near term, even after the fifth round of uptick by CNY 50/t has been largely accepted by steelmakers in Hebei and Shandong.

Although steel mills might have less bargaining power amid supply tightness, some traders anticipate that poor steel margins and uncertainty surrounding downstream sales might exert downward pressure on domestic met coke prices in China.

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By Aditya Sinha