Stability in China’s coke market despite hiked Shanxi guideline price

China's domestic coke market maintained an overall stability in the various regions throughout the past week. In spite of the considerable hike made by the Shanxi Coking Industry Association to its guideline coke price for August, coking enterprises failed to reach an agreement with steel mills on their August price levels on account of the correction seen in the finished steel market; as a result, market prices of coke remained at their previous levels in the past week.

On August 10, the Shanxi Coking Industry Association in China announced an upward adjustment of RMB 170/mt ($25/mt) to its guideline coke price for August; however, market prices failed to follow up due to the declining movement in the finished steel market. At present, the mainstream quotations of second grade coke from large producers in Shanxi Province are still in the range of RMB 1,700-1,750/mt ($249-256/mt), while Hebei Province-based mills have kept their purchase prices at RMB 1,750/mt ($256/mt) for second grade coke, with their prices for first grade coke staying at RMB 1,900-1,950/mt ($278-286/mt). Meanwhile, coke prices in Pingdingshan, Henan Province are at RMB 1,650/mt ($242/mt), with the mainstream prices in the eastern coke market at RMB 1,800-1,850/mt ($264-271/mt), both neutral week on week. In addition, the mainstream prices of coking coal in the domestic market have risen slightly to the range of RMB 1,250-1,300/mt ($183-190/mt).

Due to the slow resumption of output operations at coal mines based in Shanxi Province, coking coal production is not likely to see any big increase, and so the domestic coking coal market is expected to continue to be characterized by tight availability and lofty price levels. Moreover, with many coking enterprises intending to expand their production, the supply shortage of coking coal is the main reason behind the hiked guideline coke price in Shanxi. Shanxi Coking Coal Group has made an overall upward adjustment to its coking coal prices for August, with prices of some popular grades of coking coal up by RMB 120/mt ($18/mt) and prices of other fat coals generally up by RMB 100/mt ($15/mt).

Looking at the current situation, the Chinese coke market is expected to be impacted gradually by the sliding movement in the local finished steel market. Although coke prices remain strong due to the tight supply of coking coal, market demand for coke will weaken if the finished steel market fails to register a halt to its declining trend in the near future.