Coke prices may stagnate as Chinese steel market could see corrections in July
By Ginger Ding and Terry Wang
Shanghai. June 11. INTERFAX-CHINA - Rising domestic coke prices over the past few months could stabilize as early as next month as demand from steel mills is expected to slide, Chinese industry analysts told Interfax on June 9.
"Since the end of April, domestic coke prices have been increasing on the back of improved coke consumption from downstream steelmakers. However, that trend could end in July as the domestic steel market climate is expected to change, including rises in crude steel output," Yu Liangui, an industry analyst with Mysteel Information, said.
So far though, coke prices have fared well due to the higher production rates of Chinese steelmakers.
The Shanxi Coking Industry Association (SCIA) recently announced its June coke reference price of RMB 1,650 ($241.23) per ton for Shanxi Province, China's largest coke production base. According to Zeng Lili, an industry analyst with ChinaCCM.com, the reference price is approximately between RMB 60 ($8.77) per ton and RMB 70 ($10.23) per ton higher than that of Shanxi's market price in May.
Prior to that, the SCIA also raised its coke reference price by RMB 60 ($8.77) per ton in May.
Luo Bingsheng, vice chairman of the China Iron and Steel Association, previously told Interfax that China's daily crude steel output in May is expected to be higher than the average 1.42 million tons recorded in April.
Mysteel's latest forecast estimates that the country's daily crude steel output in late May will reach an average of 1.49 million tons. Yu predicted that output may further increase over June, which could impact domestic steel product prices in July at the earliest.
In Shanghai the average price of hot-rolled steel coil, which is representative of steel products, stands between RMB 3,450 ($504.39) per ton and RMB 3,480 ($508.77) per ton at present.
Aside from oversupply concerns, the domestic steel market is facing uncertain steel product demand in the months ahead, and could also be dragged down by the possible fall in commodity prices against the strengthening U.S. Dollar Index.
As long as steel product prices do not drop drastically in July and coke producers refrain from significantly ramping up production, domestic coke prices are expected to remain stable. The SCIA recently called on coke producers in Shanxi to maintain a 50 percent production capacity utilization rate in July.
Coke prices over the last few months have also increased on higher coking coal prices, which will provide some support in the months ahead as coking coal suppliers still enjoy a relatively strong pricing position due to supply shortages.
Ma Xiaoguang, a coal analyst with Umetal, told Interfax that coking coal prices of large-sized coalmines changed little in May, however, prices of smaller coalmines climbed by around RMB 80 ($11.71) per ton.
"The increase in coking coal prices last month was triggered by a rise in the output of small-sized steel mills," Ma said.
Ma noted that international coking coal prices are leveling with domestic prices amid growing shipping freight rates, which may lead to shrinking coking coal imports and higher domestic coking coal prices.