MYSTEEL: Minor lift seen in Chinese met coke prices in May

The forecast was based on the fact that demand for met coke from domestic steelmakers remains buoyant for now while coke supplies are relatively tight, the report said.

In fact, some signs of improving coke prices already emerged in mid to late April when domestic coke producers pushed through three hikes in their coke selling prices totalling Yuan 300-330/tonne ($41.5-45.6/t). These increases, occurring within half a month, bolstered the profitability of the makers after they were forced to accept reductions on no fewer than eight occasions since January, as Mysteel Global reported. The reductions had squeezed their prices by a cumulative Yuan 800-880/t.

Given this, by the end of April China's national composite coke price under Mysteel's assessment had jumped by a notable Yuan 300.7/t from mid-April to reach Yuan 1,994.5/t including the 13% VAT.

On May 1, the first business day after China's five-day Labour Day holiday, domestic coke producers announced they were seeking a fourth price hike by the same Yuan 100-110/t – a declaration that was quickly agreed to by leading steel mills in North China's Hebei and East China's Shandong.

Recent improvements in the margins of Chinese steelmakers, coupled with a slight recovery in steel prices and trading activity, have fuelled their production enthusiasm and increased demand for feed coke, the report noted.

For example, Mysteel's survey among 247 Chinese steel mills revealed that they produced 2.31 million tonnes/day of hot metal on May 2, higher by 70,900 t/d or 3.2% compared to a month earlier.

Despite the price spikes in the latter half of April, the coke price would likely peak in the first half of this month, the report said, before gradually losing some momentum throughout the remainder of May.

In terms of coke availability, domestic coke supply may increase gradually for the rest of this month, as most Chinese coke makers – after managing to lift coke prices – have finally recovered from the steady losses that they had endured for nearly four months. This has prompted them to increase their coke output, it said.

For example, coke output at the 230 Chinese independent coke manufacturers surveyed by Mysteel rose by 19,300 t/d on month to 493,300 t/d on average as of May 1.

Besides, the coke price trend is closely tied to the performance of steel prices and transaction activity, the report observed. Should the country's steel demand fall short of expectations this month, coke prices could also face some pressure, with Chinese steelmakers likely to negotiate price cuts with their coke suppliers if steel margins become untenable, the report warned.

Written by Winnie Han, hanyueran@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com