Chinese coke prices remain at low levels

Retaining their overall softness, Chinese coke prices still remained at relatively low levels over the past week. With the escalating production cuts in various regions, market demand began to show signs of recovery. Meanwhile, in line with the bearish export market, China's major coke production area Shanxi Province posted a sharp slump in coke exports.

The Chinese domestic coke market showed weak stability over the past week., with a minor improvement observed in the trading performance. At present, the mainstream quotations of second grade coke from large producers in Shanxi Province are in the range of RMB 1,400-1,500/mt ($206-220/mt), while the prices of coke in Huaibei, Anhui Province are around RMB 1,450-1,600/mt ($220-234/mt). Meanwhile, the purchase prices of second grade coke announced by mills in Tangshan are at RMB 1,500-1,550/mt ($220-227/mt). In addition, the ex-factory prices of coking coal in the Taiyuan area are down about RMB 50/mt ($7/mt) week on week to RMB 1,100-1,200/mt ($162-176/mt).

In the context of the narrowing profit margins in the coking industry, market prices of coking coal in the Shanxi and Henan regions have also been forced to go down, thus relieving the cost pressure on coking enterprises to a certain extent. In addition, with domestic crude steel production remaining at a high level, most coke producers still express a certain confidence as regards the prospects for the market in May, believing that the current weak demand has mainly resulted from a cycle of curtailed purchases by the mills, but that market demand still possesses great momentum based on the level of national crude steel production. Thus, coke producers believe that the market is likely to see a recovery in May. Looking at the current situation, given the limited room for further downward movement in coke prices, the development of the finished steel market will still have a great impact on coke prices in the coming period.

Due to the sluggish demand in the international market, China's coke exports have slumped significantly. In the first two months of 2009, China's coke exports marked their lowest point of the past five years. Shanxi Province, the country's main production region, posted a total of 44,000 mt of coke exports for the January-February period, down 94.9 percent year on year, with February exports amounting to just 6,365 mt, down 98.1 percent compared with the same period last year. Furthermore, given the continuous decrease in international coke prices and also the relatively low freight rates, imported coke is beginning to look attractive to Chinese buyers.