Proposed price cuts face backlash from Chinese coke makers

Chinese metallurgical coke producers are showing great resistance to the 50-55 yuan/t price cuts proposed on 11 June by several major steel mills in northern China's Hebei province and Tianjin city.

At a meeting held on the afternoon of 11 June, coke makers from key production regions including Shanxi, Hebei, and Inner Mongolia decided to refuse the proposed price cuts amid still high coke-making costs and potential production decrease, vowing to stop supplies to steel mills reducing purchase prices.

Coke prices have remained stable amid a tussle between coke and steel firms since a 100-110 yuan/t decline realized on 21 May after four rounds of price increase.

Many coke producers contacted by Sxcoal said the price decrease requests are out of sync with the prevailing market trend. They rejected the proposal in light of regional supply constraints, high coking coal prices, and the fact that many of them are already operating at a loss.

Coke producers also planned to control production and hike prices moderately to reduce losses, according to the meeting.

Coking plants currently are maintaining normal capacity utilisation, but challenges of production reductions remain due to thin margins and environmental measures. Most producers suffered losses of 150-230 yuan/t and 50-190 yuan/t for dry- and wet-quenching coke, respectively.

It was said that all the participating enterprises have low coking coal inventory and no coke stocks with smooth deliveries. Many producers have already received orders with end-June delivery.

Steel mills continued to operate at high capacity, with blast furnaces reopening, leading to growing coke demand, while their coke inventories remained low, the meeting said.

Meanwhile, captive coking plants faced significant losses of around 200 yuan/t on average and have cut production by 10-30% due to high coking coal prices and issues with top-charging coke ovens. Steel mills had to increase coke purchases from other coking plants to reduce costs. These factors indicate sustained coke demand from steel mills.

Nevertheless, a few coke producers opted to accept this price cut from 15 June, Sxcoal learned from sources. Steelmakers are facing falling finished steel prices. On 11 June, the price of Shanghai HRB 400 rebar (20 mm) stood at 3,580 yuan/t , down 40 yuan/t from the week-ago level, while Shanghai hot-rolled coil (3.0 mm) fell 10 yuan/t to 3,800 yuan/t. Tangshan Q235 billet price decreased 70 yuan/t w-o-w to 3,370 yuan/t.

Chinese coke market is expected to remain in a stalemate in the near term amid weakened supply-demand dynamics.

Note: This article has been exchanged under the article exchange agreement between BigMint and SX Coal.