Major Chinese steelmakers proposed a fifth round of coke price cuts last week; however, as feed coal prices fell more sharply than coke prices, cokemakers maintained normal production and deliveries.

The Index

On December 30, the CR China Met Coke Price Index (CRMP) fell 3.15% week on week at 160.33 points; the CR China Met Coke Stock Index (CRMS) ticked up 1.26% to 71.45 points on the same day.

Lately in the market

Coke-making profits rebounded as coking coal miners lowered prices further, although coke demand was capped by declined production of molten iron. A survey by Sxcoal of 100 coking plants showed an average profit of 70 yuan/t for the week ending December 25, expanding by 20 yuan/t from the preceding week.

Last week, environmental protection measures limited coke production at several plants. However, as declined feed coal prices ensured better coke-making profits, some coke firms slightly eased production controls.

The capacity utilization of surveyed coking plants ticked up by 0.07 percentage point on the week to 81.17% over the week ended December 25, Sxcoal's data showed.

Pessimism prevailed in the coke market amid sluggish demand and falling feed coal prices.Steelmakers have initiated the fifth round of coke price cuts, deepening the prevailing sidelined sentiment. Coke sales slowed, with deliveries limited in certain regions. As of December 25, the surveyed coking plants held 717,900 tonnes of coke stocks, rising 35,000 tonnes from the week prior.

With finished steel trading persistently stalled, steel mills reduced production, suspending more blast furnaces for overhauls. The capacity utilization of Sxcoal-surveyed steel mills was recorded at 78.71% as of December 27, down 0.92 pp week on week.

As most steelmakers reduced coke consumption and coke firms were active in shipping cargoes to mills, the coke inventory at Sxcoal-surveyed mills was enough to cover 12.42 days as of December 27, up 0.28 day from a week ago.

On December 27, 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, down 50 yuan/t from the week prior; 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 week on week.

On the same day, 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, falling 50 yuan/t on the week. Grade II met coke of the same quality was assessed at 1,390 yuan/t in Rizhao, DDP basis with VAT, dropping 50 yuan/t from a week earlier.

Transfer ports

The bearish sentiment thickened at eastern ports as coke purchases were constrained by slumped molten iron production and accelerated decline of coking coal prices. There were very few trades concluded during the past week given scarce cargo availability.

On December 27, Fenwei assessed Quasi Grade I coke at 1,600 yuan/t, FOB Rizhao port with VAT, down 30 yuan/t week on week.

The combined coke stocks at Rizhao and Dongjiakou ports stood steady from a week ago at 1.2 million tonnes on December 27. That was 0.83% higher than the month-ago level and 6.19% year on year, Sxcoal's data showed.

Downstream market

Steel prices generally held steady during the previous week, mainly supported by a relatively resilient futures market.

The price of Shanghai HRB 400 rebar (20 mm) stood at 3,370 yuan/t on December 27, unchanged from a week ago, while Shanghai hot-rolled coil (3.0 mm) also stayed flat week on week to 3,540 yuan/t. The Tangshan billet price increased 20 yuan/t on the week to 3,060 yuan/t.

Given limited trading liquidity and the suspension of blast furnaces, steel mills are likely to exert further downward pressure on coke prices.

Forecast

The Chinese metallurgical coke market is anticipated to remain under pressure in the coming week, with steelmakers' procurement expected to remain limited due to subdued seasonal demand. Changes in coking coal prices and molten iron production should be closely monitored.