Met Coke: Chinese producers hold back on "winter restocking" for coking coal

Unlike the previous years, China's metallurgical coke manufacturers - including both captive players affiliated to steel mills and independent merchant producers - have shown no inclination to stock up coking coal for winter operation so far in November amid subdued coke price, high stocks on hand and frequent restrictions.

"We have had to idle several of coke ovens because of the consistent restrictions," said an official from a steel mill in North China's Hebei province that has its own coking facilities.

He admitted that the mill can't afford to buy any more coal, as "our inventories are full, while our coking will be disrupted frequently in the upcoming 'winter heating season' (from mid-November to late March)".

By the end of October, coking coal stocks at the independent coke plants and steel mills had persisted higher than a year ago, as the total coal stocks at 230 independent coke plants across China hovered at over 14-15 million tonnes during March-October, while in 2018 the stocks at these plants climbed up steadily from 12.8 million tonnes in August to 17.3 million tonnes by the end of December.

Usually, China's coking coal users including coking plants and steel mills will need to keep some coking coal at plants for winter consumption, as both the coking coal mining and transportation will be impacted amid low temperature, safety measures.

Besides, rail service will prioritize transporting agricultural products such as vegetables and fruits and thermal coal to guarantee citizens' daily life and heating needs in cold winter days and in particular around the Chinese New Year break usually over late January-mid February.

In 2020, Chinese New Year celebration will officially start from January 24 for seven days, which will be two weeks earlier than in 2019.

A source close to the market in East China's Anhui, however, has not observed any clear signs of increased coal procurement either as of early November, though it should have started as the province relies on the supply from Anhui, Central China's Henan and North China's Shanxi.

"Small- to medium-sized coking plants mainly rely on the coal replenishments from the spot market, but the narrowed coke margins have deterred them from buying much," she said, adding, though, that large-sized coke plants and steel mills in Anhui have secured steady coal supplies via long-term deals and pre-scheduled deliveries to minimize any winter affection".

As of October 31, the coke margins at 30 independent coke plants was averaged Yuan 79.5/tonne ($11.4/t), or nearly 90% lower on year from Yuan 702.4/t.

Steel mills and coking plants in Shanxi, fortunately, have no such needs with the province being a key coal production base in China.

"Our steel works are very close to the mines, and even when the Shanxi railways are busy with thermal coal delivery in winter, we have little issue receiving our coking coal by rail in time," an official from a steel mill in Shanxi confirmed.

PRICE ASSESSMENTS

Chinese met coke export prices for the 64% CSR and the 62% CSR grades are currently assessed at around USD 281.00/MT and USD 267.00/MT FOB China respectively.

Indian met coke import prices for the 64% CSR and the 62% CSR grades amount to USD 286.00/MT and USD 269.00/MT respectively on CNF India basis, both the prices have decreased by USD 3/MT from the rates that prevailed during the week gone by (as on 30th Oct'19).

India's domestically produced met coke prices have also decreased by about INR 250/MT over the past week.

The current ex-works prices of the blast furnace grade are hovering at around INR 24,000/MT (east coast) and INR 23,750/MT (west coast).