Shanxi coke prices indicate minor decline

The Chinese coke market posted a weak performance throughout the past week, with a minor slip observed in coke prices in Shanxi Province. Meanwhile, general coke demand in the domestic market has remained at normal levels, but is likely to shrink gradually in the near future under the influence of the continuous drop in China's finished steel market. In addition, the Shanxi Coking Industry Association has recently called for increased cutbacks in coke production capacity utilization rates.

In the past week, China's coke prices registered a minor slide in some regions. At present, the mainstream quotations of second grade coke from large producers in Shanxi Province are still in the range of RMB 1,650-1,700/mt ($241-249/mt), while Hebei Province-based mills have announced their purchase prices at RMB 1,750-1,800/mt ($256-264/mt) for second grade coke. 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).

The Shanxi Coking Industry Association recently issued an update to its guideline policy for August, making a downward adjustment of RMB 20/mt ($3/mt) to the previous guideline coke price of RMB 1,880/mt ($275/mt, FOT). As a result, the new settlement price of coke in August is RMB 1,860/mt ($272/mt, FOT). The said price adjustment had been expected by market players. Considering the soaring movement of local finished steel prices in July, China's domestic coke market saw a relatively sharp upward adjustment of RMB 150-170/mt ($22-25/mt) at the beginning of August, but many mills refused to accept the new price levels. Then, given the significant drop in the finished steel market in the month of August, steel mills generally upped their opposition to the high levels of coke prices, thus forcing many Shanxi Province-based coke producers to lower their prices.

On the coke production side, the Shanxi Coking Industry Association recently called for a 60-70 percent cut in coke production capacity utilization rates in order to curb the rising prices of coking coal. The production cuts made by coking enterprises are expected to provide relief from high cost pressure and to guarantee profit margins for the producers.

Overall, due to the sharp slump in China's finished steel market, steel production will be impacted to a certain degree, leading to a shrinkage in coke demand. Thus, the prospects for the Chinese coke market in the coming period appear to be somewhat gloomy.