Chinese coke market indicates minor decline

Over the past week China's domestic coke market maintained its weak performance, with a further slight decline observed in market quotations in some regions. Many steel mills have cut their purchase prices so as to gain relief from cost pressure, while a certain shrinkage has been observed in demand for coke.

China's domestic coke prices slid down further in the past week. At present, the mainstream quotations of second grade coke from large producers in Shanxi Province are down RMB 30/mt ($4/mt) to the level of RMB 1,650/mt ($241/mt), while Hebei Province-based mills have lowered their purchase prices to RMB 1,750/mt ($256/mt) for second grade coke, down RMB 50/mt ($7/mt). Meanwhile, coke prices in Pingdingshan, Henan Province are at RMB 1,700/mt ($249/mt), with the mainstream prices in the eastern coke market at RMB 1,800-1,900/mt ($264-278/mt). In addition, the mainstream prices of coking coal in the domestic market have remained in the range of RMB 1,250-1,300/mt ($183-190/mt).

In recent days, the domestic coke market in China has remained on its declining trend, while mills have seemed eager to cut back their purchase prices. Due to the reduced downstream demand for finished steel, the steel market has been characterized by climbing inventory and by declining price levels, thus forcing mills to reduce their purchase prices for coke so as to lower their production costs. Currently, mills' resistance to high purchase prices is the main factor driving down coke prices. Meanwhile, coking industry associations in most regions have urged coking enterprises to reduce their output levels and to keep their coke prices stable. For instance, Shanxi Coking Industry Association has asked local coke producers to cut their outputs to 30-40 percent of normal capacity, while Hebei Coking Industry Association has called for production to be reduced by 30 percent. In addition, these coking associations have also made a general recommendation that coking enterprises should limit their purchases of coking coal in order to curb their production costs.

Looking at the current situation, against the background of the continuing sluggishness of the finished steel market, mills' production levels have decreased again, resulting in a sharp fall in coke demand in recent days. In July, China's coke production amounted to 31.8816 million mt, up 158,500 mt or 0.4 percent month on month and up 1.8907 million mt or 6.3 percent year on year.