Chinese met coke prices likely to rebound in Sep'24
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Mysteel: After spending a lacklustre August, Chinese prices of metallurgical coke are expected to stabilise this month and may even see a turnaround if hopes for an uptick in demand from steelmakers are realised and coking coal prices rise, Mysteel predicts in its new monthly outlook report on the commodity.
In August, domestic coke prices had stayed on a downward spiral, as Chinese steelmakers succeeded in persuading coke suppliers to cut their selling prices on no fewer than seven occasions, as Mysteel Global reported. The total reduction since end-July reached RMB 350-385/tonne ($49.2-54.1/t).
As of 30 August, China's national composite coke price under Mysteel's assessment had slumped by RMB 300.4/t m-o-m to RMB 1,605.2/t, including the 13% VAT, according to Mysteel data.
These price reductions seemed to do little to reverse the mills' significant margin losses when selling steel last month. In fact, though August is usually a slow month for steel consumption anyway, most Chinese steel producers responded to their woes by curbing their production. For mills without coke plants, this limited their need for buying feed coke.
In addition, China's new rebar standards, set to be implemented on 25 September, prompted domestic steelmakers and traders to rush to sell off their existing stocks quickly before the new rules take effect, as reported. This also caused some finished steel prices to tumble to multi-year lows last month, not just those of rebars and further impacted the profitability of steelmakers.
The average profit ratio of the 247 blast-furnace steel mills across China under Mysteel's regular tracking had plummeted from the already-small 15.15% recorded in end-July to just 1.3% as of 22 August. However, the figure had picked up by 2.3 percentage points w-o-w to 3.9% by 30 August.
According to the report, as coke prices seem to have bottomed out, Mysteel forecasts a modest rebound in coke prices during this month, arguing that steel prices and demand will notch up some gains in September, a traditional peak month for steel consumption as the weather becomes more pleasant for construction work and manufacturing activities.
With some signs emerging that the steelmakers' losses are starting to ease, the improvement will likely prevent them from slashing output further, the report notes, leading to a slight increase in hot metal output during the first half of September. More traders might also replenish their coke supplies amid the brighter outlook, the report adds.
The expected modest rise in hot metal output, coupled with increasing coal prices, could provide some impetus for coke prices to rise, with the report forecasting three or four price hikes are likely to be achieved by the met coke makers this month.
Moreover, China's central government last month announced more stimulus measures to prop up the property market, which helped restore market confidence and lift sentiments to some extent, the report points out.
In sum, the report holds a cautiously upbeat view on the coke price trend in future, while warning that the sustainability of the rebound in coke prices will largely depend on an improvement in steel consumption. A brief uptick in demand would not be enough to provide much upward momentum to sustain higher prices for coke, it says.
This report has been written in accordance with an article exchange agreement between Mysteel Global and BigMint.