Analysis on Met Coke Market and Trading Tips

Last week, most coking enterprises in North China raised the price of metallurgical coke by 50 yuan, which steel mills did not accept yet. Price of metallurgical coke in Northeast Chia was stable; that of coking enterprises who priced on monthly basis in Central South China was stable; that of other coking plants went up by 50 yuan.

Coking enterprises in Southwest China planned to raise the price by 50 yuan, which was under negotiation. Metallurgical coke was in great demand recently while supply was in short. Steel mills were optimistic in purchasing for the upcoming National Day holiday.

It’s expected that the third round of price hike will be settled down this week in North China, East China and part of Central South China; price in Southwest China will rise by 50 yuan in the second half of September; the second round of price hike in Northeast will be completed.

It’s suggested that coking plants ship normally; steel mills increase purchase volume; traders with orders should pile up.

1.1 Analysis on Market

1.1.1 Changes in Market Price

Last week, most coking plants in North and East China raised metallurgical coke price by 50 yuan. Below this price, coking enterprises refused to sigh new orders although steel mills did not accept yet. Coking enterprises in Southwest China planned to take a 50-yuan hike and were negotiating with steel mills now.

Table 1: Price of Domestic Standard I Grade Metcoke in Spot Market (yuan per ton)

Source: SteelHome Database (Note: Metcoke index in Yunnan and Guizhou provinces is A14CSR60; index of standard I metcoke is A13%, CSR60%.)

1.1.2 Price Adjustment to Purchase Price of Steel Mills

Purchase price of steel mills last week was stable. Several steel mills in Fujian took another price hike by 50 yuan. Blast furnace operating rate of steel mills stayed at a high level, showing great demand on metallurgical coke. However, supply fell short of demand in many regions. Metallurgical coke inventory in leading steel mills in East China kept dropping, but it’s difficult to replenish stock due to blocked sluice gates along Yangtze river.

Table 2: Purchasing Price of Metcoke quoted by Domestic Steel Mills (yuan per ton)

Source: SteelHome Database

1.1.3 Capacity Utilization Rate of and Inventory at Coking Plants and Steel Mills

(1) Capacity Utilization Rate

Last week, the capacity utilization rate of the 233 independent coking plants calculated by the SteelHome rose by 0.02% to 83.91%. It’s expected to keep at a high level.

The operating rate of 202 domestic steel mills in terms of production capacity increased by 0.07% to 94.73% last week because increasing small blast furnaces came back into production. It’s expected that blast furnace operating rate this week will be stable at a high level.

(2) Inventory

Last week, coke inventory of 100 independent coking plants as calculated by SteelHome decreased by 24,000 t to 126,000 t. Most coking plants kept no inventory and some were waiting for the supply. Coke inventory was expected to decline after the third round of price hike.

The coke inventory of 80 steel mills decreased by 207,000 t to 5.201 mn t. Coke inventory in leading steel mills in East China kept dropping. It’s expected to be stable after coke price hike.

The coke inventory of the four major ports decreased by 90,000 t to 2.705 mn t, which might continue to decrease given financial fluctuations and high price of concentrating supplied onto ports.

1.2 Main Factors

Positive factors: 1) steel mills need to replenish stock in advance for the upcoming National Day holiday; 2) coke inventory at ports, in steel mills and coking enterprises was decreasing, so it’s difficult for steel mills to replenish stock. 3) arrivals at steel mills was impacted; 4) blast furnace operating rate of steel mills maintained at a high level, indicating great demand for coke.

Negative factors: 1) profit of building steel was not high, and some mini-mills were even in the red; 2) steel inventory was still at a high level in a short term; meanwhile, crude steel output reached a record high, such that steel mills were under great financial pressure; 3) further price hike of coke was limited given that declining building steel price and inadequate profit of steel mills.

Focus: 1) changes in the price, transactions and inventory of steel; 2) changes in the coke inventory between industrial chains; 3) changes in iron ore price and inventory; 4) profit restoration of steel mills.

Market Forecast and Trading Tips

Market Forecast: It is expected that the third round of 50-yuan price hike will be settled down in North China, East China and part of Central South China; coking plants in Southwest will raise the price by 50 yuan/t; the second round of price hike will be completed.

Trading Tips: It’s suggested that coking plants ship normally; steel mills increase purchase volume; traders with orders should pile up.

Attention: Welcome to China Coal and Coke Industry Conference!