Met coke prices likely to surge on possible Chinese ban of Australian coals
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China's ban on Australian coking coal imports is likely to aggravate the persistent shortage of metallurgical coke and lead to increased prices thereof.
Strong Chinese met coke demand and pricing have resulted into a global tightness in the met coke market after capacity cuts in the country hit production, with a severe supply shortage expected to continue in the coming months.
Chinese coke prices may soar on concerns over coking coal supply crunch
China's domestically-produced met coke prices are likely to shoot up further, if the country's coking plants were obliged to source coking coal from domestic producers and stop importing from Australia.
Coking coal supply tightness, coupled with de-capacity and replacement measures, have pushed up the country's met coke export prices to such high levels which are incompetent against other exporting nations.
China turned net importer of met coke in July for the first time in several years, importing 408,949 t and exporting 390,394 t, and the trend has continued in subsequent months. Stronger domestic demand than in other Asian countries supported domestic coke prices in China, leading to negative export parity, and creating a positive import arbitrage.
Chinese steel mills fear that coke producers might propose another round of price hike in the near term, even after the fourth round of uptick by CNY 50/t has been largely accepted by steelmakers in Hebei and Shandong.
Although steel mills might have less bargaining power amid supply tightness, some traders anticipate that poor steel margins and uncertainty surrounding downstream sales might exert downward pressure on domestic met coke prices in China.
CoalMint assessed the latest price for met coke with 12.5% ash in northern China at CNY 2,010/t, or $300/t FOB China -- prices remained supported at higher levels on firm demand despite shrinking steel margins.
Meanwhile, the spot price (FOB) for Australian premium hard coking coal slumped by over $8/t yesterday as the demand outlook weakened with Chinese buyers retreating to the sidelines amid concerns over potentially tighter import restrictions on Australian coals.
CoalMint's Analysis
Even as the rumored Chinese ban on Australian thermal and coking coal imports has already aroused widespread concerns, we at CoalMint believe that such a sudden change in raw material sourcing might destabilize the country's steel industry, especially in consideration of China's heavy reliance on Australian iron ore and coking coal imports.
India Coal Import Vessel Lineup
CoalMint's latest vessel lineup data reveals that an aggregate shipment volume of 206,529 t of imported met coke has been received so far this month (Oct'20) in India -- 117,543 t at Hazira, 45,993 t at Haldia, 33000 t at Kolkata and 9,993 t at Vizag port.
Notably, all of these inbound met coke consignments are being sourced from different countries, other than China, viz. Poland (141,536 t), Japan (55,000 t) and Colombia (9,993 t).
Price Assessments
Indian import prices of met coke are currently hovering at around $285/t and $280/t for the 64% CSR and the 62% CSR grades respectively on CNF India basis.
Indian domestic met coke prices of the 25-90 mm, blast furnace grade are currently assessed at around INR 23,000/t (east coast) and INR 24,000/t (west coast).
Chinese-origin met coke export prices are currently assessed at around $324/t and $303/t for the 64% CSR and the 62% CSR grades respectively on FOB North China basis.
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By Aditya Sinha
