Recently, the coke market prices have continued to weaken, with mainstream prices of quasi-first grade wet quenched coke in Shanxi, China maintaining at 1450-1550 yuan/ton. As the fourth round of price cuts has been implemented, profits for coke enterprises have further compressed, with some companies approaching the breakeven point and even planning production cuts due to losses. Although coke inventory remains low, coking plants are rather pessimistic about the market outlook, focusing on actively shipping goods.
Supply and Demand Reduction Continues
From the supply side, production at coking plants is gradually decreasing. On one hand, due to sturdy costs of input materials, coke enterprises are under significant production pressure, leading some to maintain production limits. Moreover, in the northwest and Shandong regions, local pollution control has intensified production restrictions, with Shandong coking plants limiting production by up to 30%. Current operational rates at coking plants are around 72%, reflecting a decrease from previous levels, with daily output reduced and inventory levels declining concurrently.
The demand side is equally weak. With steelmill profits being compressed and scheduled maintenance plans, pig iron production continues to decline, and the year-end maintenance and production reduction plans announced by steel mills are expected to further weaken demand for coke. Additionally, despite downstream demand for winter storage restocking, the scale of restocking is unlikely to match previous years. Under expectations of low prices, the overall restocking pace has slowed, providing limited support for coke prices.
Lack of Momentum for Coking Coal Price Rebound
The price of coking coal has been relatively stable but lacks upward momentum. Prices of some coal types have slightly rebounded, yet market confidence has been dented by the failure of online auctions. Currently, the supply of coking coal is relatively sufficient, with price support weaker than in previous years, and its impetus to drive up coke prices is limited.
Seasonal Benefits Diminish, Market Pressure Increases
Presently, the pattern of dual reduction in supply and demand in the coke market is evident. With reduced production at coking plants, coke supply is gradually decreasing, but reduced production at end-use steel mills simultaneously weakens demand. Coupled with the constraint of weak steel prices, further possibilities for coke price improvement are diminished. Moreover, steel mill coke inventories are steadily increasing, winter stockpiling is weaker than in past years, reducing seasonal favorable factors, and market pressure continues to grow.
Summary and Outlook
Overall, the current coke market is in a state of weak balance. Production cuts on the supply side have not yet formed a clear support for prices, while demand shrinkage further suppresses market performance. Against the backdrop of a sluggish macroeconomy and end-demand, coke prices are unlikely to rebound significantly in the short term and are expected to continue fluctuating at low levels.
