Coke industry may see upturn

Tuesday, 06 June 2006 09:58:38 (GMT+3)   |  
       

Global coke industry has been suffering from excessive supply since 2005. However, the situation may begin to change soon with the decreases in capacities and measures taken in China. China accounts for more than 40 percent of global coke production and more than 50 percent of global coke exports. Shanxi province, the hub of coke production in China, has decided not to permit any new coke projects for the next five years. Therefore, although the quantity of coke production continued to increase, the growth rate has been lower than that of pig iron. China produced 81.6 million metric tons of coke in the first four months of the year, up 11 percent year on year. In the same period, the country produced 122.8 million metric tons of pig iron, up 20.1 percent year on year. That means, the pig iron production in 2006 has eaten into the excessive coke inventory. On the other hand, Ukraine's coke production fell 9.1 percent year on year to 6.05 million tons in the four months, due to its low price and high transportation cost. Looking at the demand side, we have begun to see an increase in demand from European and American markets. Steel rolling capacity has reached to a high level in Europe and America, while pig iron making capacity has fallen, obviously short of the rolling capacity in these continents. Especially, Chinese coke exports to South America may increase due to insufficient quantity of coke in this region to produce pig iron. Meanwhile, various mills in other countries are also expected to increase their pig iron making capacities, which would consequently increase China's metallurgical coke exports further. Chinese coke export price, which had fallen down to $120/mt FOB level in 2005 has recently returned to $140/mt FOB level, both due to the favorable mood in the steel market and the efforts of Shanxi Coke Association. China's coke export quantity and price may increase further, so long as the upward trend continues in global steel markets. Therefore, coke prices may increase on the global scale.

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