The seventh metallurgical coke price reductions of 50-55 yuan/t was implemented in China last week, resulting in an overall decline of 350-385 yuan/t since late July. Steel mills continued to suffer losses, while some with low coke stocks increased purchases following the latest price cut.

The Index

On September 2, the CR China Met Coke Price Index (CRMP) fell 8.88% week on week to 160.33 points; the CR China Met Coke Stock Index (CRMS) slid 4.17% on the week to 70.65 points on the same day.

Lately in the market

China's coking coal market stabilized last week, with some grades even seeing price increases. This, coupled with the drop in coke prices severely impacted coking plant profitability. A survey by Sxcoal of 100 coking plants showed an average loss of 2 yuan/t for the week ending August 28, compared to a profit of 13 yuan/t the previous week.

Deteriorating margins curbed production enthusiasm among some coke makers, prompting them to implement stricter production limits. The capacity utilization of surveyed coking plants inched down by 0.63 percentage point week on week to 80.53% over the week ended August 28, Sxcoal's data showed.

Coke stocks continued to accumulate at coking plants although some resumed steel mills increased procurement and a few traders re-entered the market in the wake of rebounding futures and spot steel prices. Buyers largely kept a wait-and-see stance, and some coking plants started to hold back on sales.

As of August 28, the coking plants held 695,400 tonnes of coke stocks, a 14.73% weekly increase and marking the ninth consecutive week of gains.

Some steel mills with reasonable stocks continued to control coke arrivals, while some others resumed blast furnace operations, leading to increased coke consumption. In addition, some supplies were diverted to speculators. Coke stocks held by Sxcoal-surveyed steel mills were enough to cover 11.17 days of usage as of August 28, down 0.05 day week on week and snapping a seven-week sequential increase.

The capacity utilization of these surveyed mills stood at 76.41% as of August 30, slipping 1.06 percentage points week on week.

On August 30, Luliang Quasi Grade I met coke (0.7% sulfur, 13% ash, CSR 60) was assessed by Fenwei at 1,460 yuan/t, ex-plant with VAT, falling 50 yuan/t week on week; that of Jinzhong Grade II met coke (0.8% sulfur, 13.5% ash and CSR 55) at 1,340 yuan/t, also down 50 yuan/t from the preceding week.

Fenwei assessed the price of Grade II met coke (0.8% sulfur, 13.5% ash, CSR 55) at 1,540 yuan/t, DDP Tangshan with VAT, down 50 yuan/t week on week. Grade II met coke of the same quality was assessed at 1,390 yuan/t in Rizhao, DDP basis with VAT, also a 50 yuan/t drop from a week ago.

Transfer ports

Several traders with futures and spot businesses sparked inquiries amid rising futures prices, but transactions remained sluggish, alongside few saleable resources.

On August 30, Fenwei assessed the Shandong Quasi Grade I coke at 1,720 yuan/t, FOB Rizhao port with VAT, up 50 yuan/t week on week.

Coke stocks notably decreased at ports last week due to growing offtakes at the end of the month. The combined coke stocks at Rizhao and Dongjiakou ports fell 5.59% from a week ago at 1.35 million tonnes on August 30. That was 8.78% lower than the month-ago level but up 2.27% year on year, Sxcoal's data showed.

Downstream market

Steel products prices rebounded last week backed by rising raw material costs and improved demand. Prices of iron ore, coking coal, and steel scrap prices climbed up in the week, before weakening again as of late last week.

The price of Shanghai HRB 400 rebar (20 mm) stood at 3,290 yuan/t on August 30, up 100 yuan/t from a week ago, and Shanghai hot-rolled coil (3.0 mm) was up 70 yuan/t week on week to 3,230 yuan/t. The Tangshan billet price increased 70 yuan/t to 2,970 yuan/t.

The daily transaction of construction steel averaged 121,000 tonnes over August 26-30, basically unchanged week on week yet still 26% lower year on year.

China's Purchasing Managers' Index (PMI) for the construction industry decreased by 0.6 percentage points from a month ago to 50.6 in August, due to continuous high temperatures and severe downpours in China, according to data from the National Bureau of Statistics.

The steel PMI dropped 2.1 pps on the month to 40.4 in August, showing a sustained weakness in the market, according to the latest data released by the China Steel Logistics Professionals Committee (CSLPC).

Nevertheless, the CSLPC expected steel demand and prices to rebound in the upcoming peak season for steel consumption in September.

Forecast

Chinese met coke prices are expected to have limited downside risks in the near term due to improved supply-demand fundamentals. Rising feed coal costs, increased coke demand, and reduced supplies are anticipated to support the coke market.