Global metallurgical coke exports drop over 10% y-o-y in Jan-Jun'23

*Total shipments fall to 11.68 mnt compared with 13.23 mnt in H1CY'22

*Imports by the EU drop 6% y-o-y on sharp fall in steel production

*Merchant coke supply to shrink in medium term on rising captive capacities

Global trade in metallurgical coke used in steel-making dropped 12% y-o-y in January-June, 2023 (H1CY'23) to 11.68 million tonnes (mnt) from 13.23 mnt in H1CY'22, as per latest data maintained with CoalMint.

Around 576 mnt of met coke was consumed by steel mills across the globe in 2022 to produce roughly 1,330 mnt of hot metal, while traded volumes were recorded at 28.45 mnt--a decrease of over 4% compared with 29.75 mnt in 2021.

Therefore, the global share of captive production of coke for steel-making is over 95%, with just about 5% of total demand met by merchant supply.

Top exporters

China remained the top seaborne exporter of met coke, with total shipments at 4.06 mnt--a marginal decrease of 2% y-o-y. China was the largest exporter in 2022 with nearly 9 mnt of shipments recorded. Poland and Columbia were among the other top exporters in H1 with 3.51 mnt and 1.82 mnt, respectively. While exports from Poland declined a marginal 3% on the year, Columbian exports dropped 23% during the period.

Notably, exports by the US decreased sharply by 51% y-o-y to 570,000 t compared with 1.17 mnt in H1CY'22. In contrast, Indonesia increased its total exports by a staggering margin to 310,000 t in H1 from a low base of just 10,000 t in the year-ago period.

Top importers

The largest coke importer during the period under review was the EU with total volumes of 2.45 mnt--a decrease of around 6% y-o-y. In contrast, India increased imports of coke sharply by around 65% on the year to 2.13 mnt in January-June'23 from 1.3 mnt in the year-ago period.

Notably, seaborne coke imports by Brazil and Indonesia increased by 55% and 110%, respectively, while imports into Japan fell by 60% y-o-y.

Why global coke exports shrank?

*Drop in crude steel production: As per data from the World Steel Association (WSA), global crude steel production fell by 1.01% to around 944 mnt in H1CY'23. The share of hot metal in total production is 70.8%, as per WSA. So, total hot metal output in H1 stood at around 670 mnt. Notably, regions and countries with a significant share of the BF-BOF route in crude steel production witnessed sharp y-o-y declines in steel output in H1. Among these were the EU (-10.9%), Brazil (-8.9%, Japan (-4.7%) and Germany (-5.3%). Production increased in China and India, countries with a high share of the BF-BOF route, but which rely almost entirely on captive production.

*Steep fall in US, Columbian exports: Total shipments from the US and Columbia dropped by around 110,000 t y-o-y in H1. US exports to its major market, the EU, dropped on low steel demand in Europe and its impact on steel production. Once energy prices started stabilising in 2023, market participants in the EU commenced reselling coal and coke cargoes to Asia to minimise inventories accumulated due to frenzied buying following the outbreak of the Russia-Ukraine war, constrained gas supplies and overall energy inflation. On the other hand, Columbian exports of predominantly low-phosphorous nut coke fell on weak demand from ferroalloys producers. Poland, too, witnessed a 3% drop in exports due mainly to lack of demand in the EU.

Other highlights

*Imports into India up 65%: Imports by India increased sharply because of availability of low-priced Chinese cargoes compared to domestic coke. CoalMint assessed Chinese coke (64% CSR) prices CNF India at $320/t on 27 July--less than INR 26,000/t whereas domestic prices are at INR 33,000/t exy eastern India. Merchant coke producer sources told CoalMint that cheap imports have greatly eaten into profitability, as premium coking coal prices remain firm, while imported coke prices from China continue to soften. Coking coal is assessed at around $250/t FOB Australia while the landed price of Chinese coke is $320/t. With coke prices at these levels, premium HCC should be around $190/t FOB in order for merchant producers to be able to extract a margin, sources said. India's merchant coke capacity is around 7 mnt.

*Indonesian exports rise sharply: Indonesia, the world's largest coal exporter with a global share of around 45%, is on the verge of becoming a major supplier of metallurgical coke thanks to hefty investments by Chinese companies. Over 17 mnt of capacity is in the pipeline--a key emerging supply source for ASEAN countries. Chinese investors have identified Indonesia as an ideal site for setting up met coke plants to fulfill their surplus requirement amid tightening domestic environmental regulations.

Outlook

The global seaborne met coke market is expected to contract gradually with major expansion in captive production capacities, especially in India and Brazil. Despite projections of global coking coal demand increasing by over 2% in H2, world coke trade volumes may not rise due to the predominant share of captive production.

That apart, steel output curbs in China in H2 are likely to result in lower coke production and exports, while imports by the EU are unlikely to rise on bearish steel demand. Therefore, CoalMint expects global met coke trade volumes in 2023 to drop lower than 2022 levels.

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