Fifth coke price cut takes effect across China

Mysteel: China's metallurgical coke prices declined by another 50-55/tonne ($7-7.7/t) on 20 August, marking materialisation of the fifth such price reduction since late July across the country, according to market sources. Yesterday, leading steelmakers in North and East China joined their peers' earlier move to demand a new round of coke purchase price cut, prompting the price cut to take effect quickly. Mills' such move reflects their determination to seek profit room by pressing down costs on raw materials in the face of a softening steel market outlook.

After the adjustment, prevailing offers for wet-quenching quasi-first-grade met coke in North China's Shanxi decreased to yuan 1,530-1,630/t on Tuesday, while those for dry-quenching quasi-first-grade coke in East China's Shandong ranged from yuan 1,935-2,005/t, exw basis with VAT included, Mysteel learned.

The same day, China's national composite coke price under Mysteel's assessment stood at yuan 1,702.3/t including the 13% VAT, down by yuan 46.6/t on day. However, met coke prices are unlikely to hit the bottom in the days ahead, as restocking demand from Chinese steel mills is expected to shrink further in the near term, which could lead to more rounds of price cuts on coke selling prices, Mysteel Global learned further.

The worsen profitability for almost all steelmakers as a result of continuous falls in steel prices will remain a drag for prices of steelmaking inputs, a Shanghai-based analyst said. Given this, most domestic steel mills will likely further limit coke delivery from their suppliers and show minimal interest in booking new cargoes in response to their expanding losses on selling finished steel.

For domestic coking plants, the slowed coke sales have also led to accumulating inventories at their plants. This, together with deep drops in coke selling prices, have prompted some of them to cut production as well, a source said. Yesterday, port traders also pared offering prices for met coke cargoes by yuan 50-55/t. At Rizhao and Qingdao ports in Shandong province, coke stocks totalled 1.42 million tonnes (mnt) as of 20 August, unchanged on week, Mysteel's tracking data showed.

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