Chinese Met Coke Prices Fall on Domestic Market Weakness

Chinese met coke prices fall by around USD 9/MT in a just two days time. Prices for Chinese coke exports fell amid the weakness seen in the domestic coke market.

In the Chinese domestic coke market, market participants reported that steel mills in Shanxi have proposed to cut prices by USD 14-15/MT, making them the first round of price cuts.

Chinese cokeries' profit levels are now higher than steel mills' margins that explain the room for steel mills to propose price cuts. "Due to rising iron ore prices, steel mills margins are eroding and mills will first cut coke prices," a coke seller said. He estimated mills' margins to be around USD 14-28/MT, while cokeries' margins are around USD 28-43/MT.

"It has started to rain at Southern China and that has dampened the coke demand, which could explain why the port prices are inching down," a coke trader said, adding that he would revise his offer downwards to around USD310/MT FOB, China for 62% grade coke.

Another coke trader shared that port stock volumes have reached a relatively high level of 4-5 MnT and the excessive supply created downward pressure on domestic coke prices. He added that Chinese coke traders should have the incentive to sell coke exports as the recent devaluation of the Yuan should encourage dollar-denominated sales. As the US-China trade spat seems to persist in the near term, the Yuan may remain volatile, he added.

Price Assessments for Week 24 (10 June - 16 June 2019)

Prices for 64% CSR and the 62% CSR grades slip drastically and assessed at around USD 326/MT and USD 312/MT FOB China respectively from the rates that prevailed in the last week (03 June - 09 June'19).

Indian met coke import prices also slip and down by USD 9/MT as compared to last week and currently hovering at around USD 340.50/MT for 64% CSR and the 62% CSR grades prices at around USD 326.5/MT on CNF India basis.

Meanwhile, a wide bid-offer gap continued in the export coke market as Chinese domestic coke prices continued on the uptrend. A tradable level was placed at around USD314/MT FOB China for Chinese 62%/60% coke with 5% total moisture.

Outlook

It is believed that in the month of June due to high temperature and rainy weather, seasonality and cyclical factors will have a certain impact on steel market demand. In terms of environmental protection, Hebei Province has issued relevant capacity measures documents. It is expected that relevant plans will be introduced in 2019.

From the perspective of steel mills, the release of production capacity of environmental protection factors is significantly greater than the release of pig iron production capacity. At present, the average inventory of coke saw a decline in independent coking plants and steel mills. Inventory of coke at ports become stabilized and the situation of coal supply and demand is tight.