China's met coke prices to fluctuate in H2CY'24

Mysteel:Chinese prices of metallurgical coke are expected to fluctuate during this half of the year, though the swings will be milder compared to last year, Mysteel predicts in a new report on the commodity that also suggests of some price rebounds might be possible.

During the first half of this year, coke prices nationwide were weak due to sluggish demand from steelmakers, with met coke prices plunging by Yuan 800-880/tonne ($110-121/t) between January 3 and April 9 as the steelmakers' margins suffered from the drop in steel prices and slow sales. The ongoing losses prompted mills in key steelmaking hubs such as North China's Hebei and East China's Shandong to push through a spate of coke price cuts in their attempt to transfer their financial burdens to their coke suppliers.

After enduring a total of eight rounds of price cuts between January-April this year, domestic coke producers were unable to tolerate their continued losses and so rammed through no fewer than four sales price increases between mid-April and May 1 which lifted domestic met coke prices by Yuan 400-440/t in total.

Then, from May to June, the country's coke prices trended lower before rebounding slightly, with leading steelmakers reducing their coke procurement prices by Yuan 150-165/t before agreeing to a Yuan 50-55/t increase. The recovery of profits encouraged domestic coke makers to start stepping up their output at that time.

By end-June, China's national composite coke price under Mysteel's assessment had reached Yuan 1,961.7/t and including the 13% VAT, and although this was lower by Yuan 542.9/t from January 2, it was still higher by Yuan 73.6/t from the same period last year.

For the current half, the report predicts that met coke prices will have limited upward momentum during the current July-September quarter and may even trend lower, as steel producers usually adopt a cautious approach to feed materials procurement during summer, normally a slow season for steel consumption in China.

However, the report predicts that the decline will not be very large as steel mills will still have to purchase some coke to ensure smooth operation of their blast furnaces. Significant production cutbacks among steel mills are unlikely in the near term, which could prevent deep met coke price falls, according to the report.

On the supply side, coke production will remain closely linked to the coke makers' profits, the report observes, adding that they will likely adjust their production lower if they begin to suffer unbearable losses.

The report identifies several factors that could benefit coke prices in H2, especially during the "golden September, silver October"-the two months when the steel market usually has high hopes for better steel sales and prices.

Domestic steelmakers still expect to lever up production later this year when the weather becomes more pleasant and conducive to construction work after summer's heat. This potential increase in steel production could drive up material prices.

Besides, Mysteel also expects the government will roll out fresh stimulus packages to rescue the property sector and boost home demand during this half, which would also contribute to underpinning the prices of steel and key steelmaking raw materials.

Moreover, towards the end of this year's October-December quarter, domestic steelmakers will be turning their attention to accumulating winter reserves of coke ahead of the Chinese New Year Festival which next year will stretch from January 29 to February 12. This will also help to support coke prices to some extent, the report adds.

However, the report also warns that the steel market still has downside risks and so retained a relatively cautious outlook. In late May, the central government had declared that the country's crude steel output should continue to be controlled for this year.If steel mills take action and reduce their output in H2, this will prove a wild card for coke demand.

Regarding coke exports, the report says that coke exports are expected to stay high during this half, thanks to growing global demand (particularly from the Indian and Southeast Asian markets) due to the competitive pricing and cost advantages of China-origin met coke compared to that from Indonesia, even though coke production capacity there has been increasing rapidly.

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