Chinese mills cut both purchase volumes and purchase prices of coke

China's metallurgical coke market has continued its softening trend over the past week. Since the mills have slowed down their purchase volumes and lowered their purchase prices for coke, the coke market prices in the various regions have generally trended down.

In the past week the mainstream quotations of second grade metallurgical coke from large scale producers in Shanxi Province have declined to RMB 1,700/mt ($249/mt), with quotations for first grade metallurgical coke standing at RMB 1,850/mt ($271/mt), down RMB 50-100/mt ($7-15/mt) week on week. Meanwhile, the purchase prices of Hebei Province-based mills are around RMB 1,850-1,900/mt ($271-279/mt) for second grade metallurgical coke, down RMB 50/mt ($7/mt) week on week. The mainstream prices in the eastern China coke market have remained at RMB 2,000/mt ($293/mt). In addition, the mainstream prices of coking coal in the overall domestic market are down by RMB 50/mt ($7/mt) to RMB 1,400-1,500/mt ($205-220/mt).

Owing to the sluggishness observed in the domestic steel market, domestic mills are currently struggling, caught in the middle between declining steel prices and higher costs of raw materials. In this context, the mills have been trying to stabilize their profits by reducing both purchase volumes and purchase prices of coke. Some mills in eastern China have even sought to lower their purchase price for coke by as much as RMB 200/mt ($29/mt), though this is unacceptable to coke producers for the time being.

Looking at the current situation, the downward trend in coke prices is set to continue in the near future. With mills' reduced purchase volumes resulting in increased inventories at coking companies, some of the latter are forced to lower their prices in order to melt excess inventory. Meanwhile, a slight decline is observed in coking coal prices in some regions, and this will provide some room for coke prices to move down further.