Chinese metallurgical coke prices gradually stabilized last week, with expectations for a fourth round of price hikes diminishing, as supply improved, demand retreated and cost support weakened.

 

The Index

On December 25, the CR China Met Coke Price Index (CRMP) stood at 248.91 points, unchanged week on week; the CR China Met Coke Stock Index (CRMS) was down 2.29% on the week to 79.34 points on the same day.

 

 

Lately in the market

The fourth round of coke price hike was increasingly less likely to materialize, considering the overall supply-demand fundamental turned looser and cost support continued to weaken.

 

While primary coking coal prices remained relatively firm, blending coking coal prices continued to soften, which resulted in reduced cost for coking plants and encouraged a few of them to slightly ramp up production.

 

The surveyed coking plants shifted from loss to profit last week, with average profit at 4 yuan/t, rebounding 18 yuan/t week on week, Sxcoal's data showed on December 21.

 

Besides, eased regional environmental inspections also led to a rebound of coke output. The capacity utilization of surveyed coking plants further rebounded by 0.42 percentage point week on week to 80.38% in the week ended December 21, marking the second straight week of rebound, Sxcoal's data showed.

 

Coking plants saw their dispatch improve compared with a week ago but remained at a subdued level. This came as transportation remained unsmooth at some highway sections even though snow-caused logistics hurdles gradually reduced as a whole.

 

The surveyed coking plants held 311,400 tonnes of coke stocks during the week ended on December 21, surging 61.93% week on week and marking the second rise after five straight weeks of decline.

 

Coke demand from some steelmakers slightly retreated as a result of the increased maintenance on blast furnaces in winter. However, most mills still maintained resilient restocking demand as their coke stocks fell to low levels amid previous adverse-weather-induced transportation disruptions.

 

The capacity utilization of blast furnaces further dipped by 0.6 percentage point week on week to 77.71% on December 22.

 

Coke stocks held by Sxcoal-surveyed mills were enough to cover 10.13 days' worth of usage during the week ended on December 21, down 0.25 day week on week.

 

On December 22, Luliang Quasi Grade I met coke (0.7% sulfur, 13% ash, CSR 60) was assessed by Fenwei at 2,310 yuan/t, ex-plant with VAT, unchanged week on week; that of Jinzhong Grade II met coke (0.8% sulfur, 13.5% ash and CSR 55) at 2,190 yuan/t, also stable from the preceding week.

 

 

Fenwei assessed the price of Grade II met coke (0.8% sulfur, 13.5% ash, CSR 55) at 2,390 yuan/t with VAT, DDP Tangshan, standing still week on week. Grade II met coke of the same quality was assessed at 2,240 yuan/t in Rizhao, DDP basis with VAT, flat from a week ago.

 

Transfer ports

The portside coke inventory remained on the downtrend, as traders were cautious in buying the material from production areas, due to sales pressure and a lack of profitability. Some traders were inclined to accelerate sales to lock in profit in anticipation of diminishing likelihood for the fourth round of coke price hike and weaker rigid demand from steelmakers.

 

The combined coke stocks at Rizhao and Dongjiakou ports were down 7.46% week on week to 1.24 million tonnes on December 22. That was 0.81% higher compared with the month-ago level but 24.39% lower than the year-ago level, Sxcoal's data showed.

 

 

The overall transactions remained subdued at eastern ports due to the continued buy-sell spread. On December 22, Fenwei assessed the Shandong Quasi Grade I coke at 2,430 yuan/t, FOB Rizhao port with VAT, stable week on week.

 

 

Downstream market

China's steel prices rebounded last week, partly as the escalated pollution alerts in some key steel-making cities restrained production.

 

The price of Shanghai HRB 400 rebar (20 mm) stood at 4,010 yuan/t on December 22, unchanged from a week ago, and Shanghai hot-rolled coil (3.0 mm) was up 70 yuan/t week on week to 4,160 yuan/t. The Tangshan billet price rose 50 yuan/t to 3,680 yuan/t.

 

Handan further upgraded air-pollution response to the red – the highest level – on December 24, with heavy-polluting industries including steel under curbs. Tangshan, the leading steel-making city in the country was also subjected to intermittent environmental checks due to pollution, and is about to restart the level-II emergency response from December 26.

 

The near-term steel prices are still likely to face downside pressure due to seasonal demand weakness and accumulation of finished steel products despite mills' increased maintenance schedule on blast furnaces.

 

Forecast

Coke prices are likely to remain stable in the near term with supply keeping moving to a looser status amid the continued improvement of logistics and retreating demand from steelmakers after recent replenishment.