China’s coke market characterized by weak stability

The Chinese coke market has generally retained its pre-holiday bearishness over the past week. Given the overall soft demand in the current coke market, most local coking enterprises have still maintained cuts or halts to their production. Looking at the current situation, coke prices in China are expected to continue to decline in the context of excessive coke supplies as well as the sluggishness of the finished steel market.

China's domestic coke market has been moving on a stable trend during the past week. At present, the mainstream quotations of second grade coke from large producers in Shanxi Province are at the level of RMB 1,550/mt ($230/mt), while Hebei Province-based mills have kept their purchase prices at 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). In addition, the mainstream prices of coking coal in the domestic market have remained constant in the range of RMB 1,200-1,250/mt ($176-183/mt).

Over the past week, the Chinese coke market has continued to be characterized by an overall slackness of demand. The Shanxi Coking Industry Association recently announced its guideline policy for October, maintaining its guideline coke price unchanged from the September level at RMB 1,700/mt ($249/mt) FOT. In spite of the considerable fall in the domestic finished steel market, coking coal prices in China have continued to remain at relatively high levels, and if coke prices should fall further, coke producers could suffer significant losses. In addition, the abovementioned association also called for a continuation of the 60-70 percent production cut by all coking enterprises in Shanxi during the month of October. It seems that the overall domestic coking industry is now in a stalemate situation, caught between high costs and weak demand.

In consideration of the shrinking demand in the domestic market and the overcapacity in local coke production, some industry insiders have suggested that the government should make certain adjustments to the export tariffs in order to boost coke exports. According to the latest figures, China's coke production in the first eight months of this year totaled 222 million mt, down 1.3 percent year on year; meanwhile, China's coke exports in the first nine months of the year came to 360,000 mt, down 10.69 million mt or 96.7 percent compared with the same period last year. As stated by the China Coking Industry Association, it would be beneficial for the development of the domestic coking industry to adjust the export tariffs given the decrease in the export volume.