China's metallurgical coke market appears to have found a temporary equilibrium following the implementation of three rounds of price cuts since the start of this month. Coke production has stabilized with regional pickups, but uncertainties loom large in both the feed coal market and finished steel demand.

Coke trading activity steadied but remained somewhat subdued in the spot market, while futures contract prices for both coke and coking coal continued to fluctuate in a wide range.

As the year draws to a close, the market has shown early signs of cautious optimism, yet the shadow of potential further price reductions still lingers.

The third round of coke price cuts implemented on December 22 pushed many coking plants to the brink of breakeven, with some already incurring minor losses. Yet, coke supply marginally increased due in part to the gradual lifting of regional environmental curbs, which had previously curtailed output in response to air pollution alerts.

Some coke makers in northern China's Shanxi and Hebei reported 80% capacity utilization, with feed coal inventories enough to cover 7 to 10 days of usage. While several producers hesitated to ramp up further due to cost concerns and sales pressure, others attempted to restore normal output levels cautiously.

However, it was worth noting that the marginal increase in production was not a reflection of confidence. Many producers remained wary of expanding output too aggressively, fearing another price decline that could push margins deeper into the red.

Improved transactions and prices of select coking coal grades began offering floor support to coke prices. Modest coal supply contraction and downstream restocking drove some competitively priced grades up by 20-50 yuan/t in major producing regions.

The overall coal market, however, saw no strong rebound. Some other miners adjusted down their offers of products due to unsmooth sales. In Yan'an of Shaanxi, some prices for Zichang washed gas coal (S 0.5%, A8%, GRI 85) dropped another 30 yuan/t to 900 yuan/t, effective December 23, Sxcoal learned.

Online transactions also showed mixed results in settlements, and auction failures persisted.

This suggests that while premium coal grades may be stabilizing, lower-grade or cost-ineffective coals could still face downward correction, triggering uncertainty of robust cost support to the coke market.

Steel mills, the primary consumer of coke, kept a conservative buying approach after coke stockpiles climbed to high levels. Participants anticipated further drops in molten iron output, as more mills mulled over blast furnace maintenance, capping their interest in coke.

Some steelmaker sources noted they were reluctant to hold large inventories, citing ongoing losses and a bleak steel demand outlook.

"Crude steel output will be equal to or slightly below November levels in December," a source said, reinforcing the likelihood of continued production cuts and lower coke needs. The chances of a near-term recovery in coke consumption appear slim.

"We're running at losses of 40 yuan/t after the third price decline. Sales have languished because steelmakers are slowing procurement," said an Inner Mongolia-based coke producer source.

Some participants expected a possible tug-of-war between coke and steel companies over a fourth round of coke price reduction in the coming weeks.