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Guo Lijuan: Basic Perspective on Current Coking Coal Market

https://en.steelhome.com [SteelHome] 2019-11-06 11:05:33

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China Steel Industry Summit for 2020 Market hosted by SteelHome, was successfully held in Xiaoshan District, Hangzhou City, Zhejiang Province, during November 1-3, 2019. This summit was jointly held by Maanshan Steel Company, Ouyeel Co., Ltd and Youfa Pipe Group. Co-hosts were Shanghai Futures Exchange, Dalian Commodity Exchange, Xiamen C&D, China Minmetals Corporation, GTXsteel E-commerce and Henan Gang Duo Industrial. Over 1000 delegates from governments, associations, steel mills, miners, traders, research institutes and media attended the event.

Ms. Guo Lijuan, Deputy Chief Economist of Shanxi Coking Coal Group Co., Ltd, delivered a keynote speech titled Basic Perspective on Current Coking Coal Market

Here is summary of her speech:

I Views on 2019 coking coal market

1) Coking coal long-term contract cooperation has maintained stability for a long time.

From January to October 2019, the contract fulfillment rate of China's coking coal enterprises and long-term contract customers showed a high level stable trend. It shows that the cooperation between long-term contract customers and coking coal enterprises remains stable, all parties are focusing on long-term cooperation, sharing economic prosperity and coping with market changes, long-term contract system has the effect of smoothing market fluctuations, maintaining price stability and promoting sustainable development.

2) Low fulfillment rate of long-term cooperative contracts in October of recent two years.

From the perspective of October in the past two years, the sudden drop in the fulfillment rate of long-term cooperative contracts has affected the production and organization of Chinese coking coal enterprises in October of these two years.

3) Dynamic exit and entry mechanism of long-term cooperative customers started.

China's coking coal long-term contract system has been in stable operation for three years and has gradually become a recognized system in all aspects.

Starting the dynamic exit and entry mechanism of long-term cooperative customers is conducive to ensuring the vitality, effectiveness and sustainability of long-term cooperative system.

4) The monthly import volume of coking coal is negatively related to the fulfillment rate of long-term contract, and it is positively related to the inventory of the whole industrial chain of coking coal.

From January to September 2019, China imported 60.95 million tons of coking coal, a year-on-year increase of 19.9%, with an average monthly import volume of 6.7722 million tons, the highest since 2013. In August 2019, China imported more than 9 million tons of coking coal, and in September, nearly 8 million tons of coking coal.

In the middle of September 2019, coking coal inventory in the whole industrial chain of Shanxi Coking Coal Group reached a stage high point, but the contract fulfillment rate in October kept at a low level of the whole year.

5) Since the implementation of coking coal long-term contract system in China, with stable price performance, it has led the international coking coal price to converge to the long-term contract price in China.

Since the signing of the medium and long-term contract price in November 2016, it has been stable for more than 35 months. In the past 35 months, the price of medium and long-term coking coal in China has been at a stable level, which has become an important support and strong guarantee for the stability of steel price. China coking coal long-term contract system has played a stabilizing role in global coking coal and will continue to play this role.

II Favorable factors of later coking coal market

1. China’s first centenary goal plan is in the decisive and final stage. We are confident in China's economy and will make contributions to building a moderately prosperous society in an all-round way with the achievements of stable development of coal, coke and steel.

2. China's economy has shown good resilience and stability in the world, attracting more and more enterprises to pay attention to and favor China.

3. The output of pig iron remains at a high level as a whole, the iron coke ratio is at a reasonable level, long process steelmaking is more economical, and the demand for coking coal will remain stable for a long time.

4. With the upgrading of coking industry, the utilization rate of production capacity will be significantly improved. Therefore, the use of coking coal will increase, and the demand of large-scale coke oven for high viscosity coal will increase.

5. In 2019, the import volume of coking coal increases significantly and the impact on the domestic market balance has attracted attention and thinking from all aspects.

6. It is an important content of building a well-off society in an all-round way to solve the practical problems of safety and environmental protection of coal, coke and steel, and realize the yearning of employees in the whole industrial chain for a better life.

III Constraints of later coking coal market

1. Due to environmental protection, short-term production restriction policy will be implemented for iron and steel and coking enterprises.

2. The overall supply and demand of coking coal market in China has entered a stable period, and the imported coal and domestic coal are in a state of complete competition. The large increase of imported coal will inevitably result in the reduction of domestic coal, the reduction of capacity utilization ratio and the disturbance to the production and operation order of domestic coking coal enterprises.

3. Accelerating the elimination of backward and excess capacity will have a phased impact on demand.

IV Factors affecting coke price

1. Favorable factors: elimination of backward production capacity and shutdown of small coke ovens that fail to meet the environmental protection standards; reduction of coke production capacity in Hebei, Shandong, Jiangsu and other major coke producing areas.

2. Constraints: it will take some time to solve the problem of low concentration of coke industry. The international demand for coke has been gradually weakened.

V Outlook

In 2020, China's coking coal market will present the characteristics of overall stability and orderly operation. The real characteristics of coking coal quality in China will be further revealed by the market, and its value will continue to increase.


(To contact the reporter on this story: crystal.lin@steelhome.cn or 86-555-2238927)
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