Shanxi Coking Industry Association again lowers coke guideline prices

The Chinese coke market has continued to be characterized by an overall bearishness throughout the past week. Faced with increased risk of incurring losses, domestic steel mills have recently lowered their purchase prices of coke and have started to restrict their purchasing volumes of coke and other raw materials, thus placing increased pressure on coke producers. Looking at the current situation, coke prices in China are expected to continue to decline in the short term.

China's domestic coke market has maintained its sliding trend during the past week. At present, the mainstream quotations of second grade coke from large producers in Shanxi Province have declined RMB 100/mt ($15/mt) to the level of RMB 1,550/mt ($230/mt), while Hebei Province-based mills have again reduced their purchase prices by RMB 50/mt ($7/mt) to RMB 1,650/mt ($242/mt) for second grade coke. Meanwhile, coke prices in Pingdingshan, Henan Province are at RMB 1,650/mt ($242/mt), with the mainstream prices in the eastern coke market in the range of RMB 1,750-1,800/mt ($257-264/mt), down RMB 50/mt ($7/mt) week on week. In addition, the mainstream prices of coking coal in the domestic market have also slipped by RMB 50/mt ($7/mt) to the range of RMB 1,200-1,250/mt ($176-183/mt).

Retaining its soft trend over the past week, the Chinese coke market has registered successive price cuts in various regions. Meanwhile, the Shanxi Coking Industry Association has lately issued a supplementary notice regarding guidelines for the September coke market, announcing a downward adjustment of RMB 80/mt as of September 15, following its previous price reduction issued at the beginning of September. It is mainly due to the continuous slump in finished steel prices that the Shanxi Coking Industry Association has now made an overall price reduction of RMB 160/mt ($23/mt) in its coke guideline prices for the month of September. After undergoing an illogical rally in July, the Chinese steel market started to decline strongly in a context of production overcapacity and sluggish downstream demand, with longs prices finally approaching production cost levels during the early September period. Given the impact of the significant drop in steel prices, the domestic coke market has been transformed from a seller's to a buyer's market. During the first week of September, southern-based mills like Pingxiang Steel, Shagang, Guangzhou Steel and Sangang lowered their purchase prices for coke by margins of RMB 100-150/mt ($15-22/mt). Moreover, the supplementary notice issued by the Shanxi Coking Industry Association also calls for coke outputs to be cut by 60 percent, but this seems unlikely to reverse the situation in the short term. By the end of August, China's monthly coke production had posted positive year-on-year rises for three consecutive months, following negative growth over the nine months before that.

Most mills have relatively high coke inventories in hand that can sustain at least 15 days of production, and certain mills in eastern China are even able to maintain 30 days of operations with their current coke inventories. In this connnection, Chinese mills are generally limiting their purchasing volumes of coke or are even halting their purchases for the time being.

Looking at the current situation, there is still room available for the further downward movement of local coke prices in the near future.