Chinese coking industry strengthens production cuts

Over the past week China's domestic coke market generally retained its soft performance, with a continuous decline observed in some regional markets. In recent days, most coking enterprises have been operating at capacity utilization rates of not more than 50 percent ; however, according to most market players, given the current weakness of the finished steel market, there is still room available for further downward movement of coke prices.

The Chinese domestic coke market recorded a mild price decline in some regional markets over the past week., in a context of the continuing sluggishness of 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 1,500-1,600/mt ($220-234/mt). Meanwhile, the purchase prices of second grade coke announced by mills in Tangshan are down RMB 50-100/mt ($7-15/mt) to RMB 1,500-1,550/mt ($220-227/mt). In addition, the ex-factory prices of coking coal in the Taiyuan area are still around RMB 1,150-1,200/mt ($168-176/mt).

Recently, the coking industry associations of Shanxi, Shandong, and Hebei - China's major coke production regions - successively announced their guideline prices and issued recommended capacity utilization rates for the month of April. Due to the sluggishness of the domestic finished steel market, mills have increased their production cuts in recent days.

According to the Shanxi Coking Industry Association, coking enterprises based in Shanxi Province should operate at 30-40 percent of capacity in April. Meanwhile, the coking associations in Shandong and Hebei have respectively recommended capacity utilization rates of 40-50 percent and less than 50 percent. Accordingly, almost 50 percent of Chinese coking capacity will be frozen during the coming period.

Although China's domestic coke market is now characterized by large-scale production cuts, at the same time demand is also shrinking significantly on the back of the continuing sluggishness of the finished steel market, which consumes 90 percent of total coke production. As a result, a certain amount of downward room is still available in the coke market in the short term. Additionally, the relatively high prices of coking coal constitute the major factor behind the slowness of the current decline of coke prices, and have been putting the coking enterprises under great pressure.