Tight supply causes slight rise in Chinese coke prices

In the past week China's domestic coke market registered a minor rise on the whole. Meanwhile, mills stepped up their efforts to make purchases against the background of the tight availability of coke supplies. Looking at the current situation, coke prices in the domestic market are likely to climb up slightly in the coming period.

Driven by the tight levels of supply in recent days, coking enterprises in the various regions hiked their ex-factory prices in succession. At present, the mainstream quotations of second grade coke from large producers in Shanxi Province are in the range of RMB 1,450-1,500/mt ($213-220/mt), while the prices of coke in Huaibei, Anhui Province are up RMB 50/mt ($7/mt) to RMB 1,500-1,600/mt ($220-234/mt). Meanwhile, the purchase prices of second grade coke announced by mills in Hebei have been raised to RMB 1,550/mt ($227/mt). In addition, market prices of coking coal remain constant at RMB 1,100-1,200/mt ($162-176/mt).

With the continuous decrease in coke inventories at coking enterprises and mills, market supply has registered a gradual tightening in recent days. On the other hand, the Chinese coking industry, especially coke producers in Shanxi Province, are still suffering losses. It is in this context that Shanxi Coking Industry Association has released its guidelines for May.

According to the latest guidelines, coking enterprises in Shanxi are advised to continue the cuts or halts to output operations which they implemented in April so as to prevent coking coal prices from bouncing. Meanwhile, coke producers in Hebei and Neimenggu have also expressed their intention to increase their production cuts in May. Considering the coke quality, costs and transportation means in the various regions, coking enterprises in Hebei, Shandong and Neimenggu hiked their coke prices by RMB 30/mt ($4/mt) from April levels, while Shanxi and Shaanxi-based producers raised their prices by RMB 60/mt ($8/mt). The above price adjustments took effect as of May 1, 2009. However, on May 5 Hebei Coking Industry Association made a further upward adjustment of RMB 50/mt ($7/mt).

Looking at the current situation, the supply shortage of coke materials is the main factor boosting up coke prices in the domestic market. Domestic crude steel production remains at a high level, thereby creating substantial demand for coke. In this context, as long as coking producers still maintain significant cuts to their operations, the imbalance between supply and demand in China's domestic coke market is expected to continue.