[SMM Coking Coal Analysis] Inventory Accumulation and Losses May Lead to a Slight Decline in Coking Plant Operations Next Week

1. According to the SMM survey, coke enterprises' profit per mt of coke was 49.3 yuan/mt this week, with profits remaining stable.

From a pricing perspective, coke prices remained stable this week, and coke enterprises' profit per mt of coke was not affected by price changes. From a cost perspective, during and after the Chinese New Year holiday, coking coal prices were mostly stable, with only some blended coal prices experiencing supplementary declines. The decline in coking costs was slow, leaving little room for profit growth for coke enterprises.

Next week, coke prices are expected to decrease, but coking coal prices are also under pressure. Prices and costs may decline simultaneously, leading to relatively small fluctuations in coke enterprises' profit per mt of coke.

2. According to the SMM survey, the coke oven capacity utilization rate was 75.4% this week, down 0.4 percentage points WoW. In Shanxi, the coke oven capacity utilization rate was 76.2%, down 0.6 percentage points WoW.

From a profitability perspective, most coke enterprises' profits remained at the break-even level, with minimal impact on production. From an inventory perspective, market transportation was disrupted during the Chinese New Year holiday, and coke enterprises continued normal production, leading to sustained inventory buildup, which suppressed production enthusiasm. From an environmental protection perspective, environmental protection policies in Shanxi, Hebei, Shandong, and other regions were not tightened, resulting in no significant impact on coke enterprises' production.

Subsequently, most coke enterprises face relatively low risks of losses, and even if losses occur, they remain within tolerable limits for most enterprises, allowing them to maintain original production levels. Coke supply remains stable. However, steel mills hold a pessimistic market outlook and maintain coke inventories at safe levels, continuing to purchase as needed. In summary, coke oven capacity utilization rates at coke enterprises may slightly decline next week.

3. This week, coke enterprises' coke inventory was 609,000 mt, up 178,000 mt (+41.3%) WoW. Steel mills' coke inventory was 2.787 million mt, down 245,000 mt (-8.1%) WoW. Coke enterprises' coking coal inventory was 2.736 million mt, down 455,000 mt (-14.3%) WoW. Port coke inventory was 1.19 million mt, up 10,000 mt (+0.8%) WoW.

After the holiday, coke enterprises experienced significant inventory buildup, while steel mills saw a notable decline in coke inventory. Most coke enterprises' profits remained at the break-even level, with stable production and high coke supply levels. However, transportation disruptions during the Chinese New Year holiday led to inventory buildup at coke enterprises. During the holiday, steel mills continued to consume their inventories, and transportation constraints also hindered coke deliveries, resulting in a significant post-holiday decline in steel mills' coke inventories.

Subsequently, most coke enterprises are expected to maintain profitability, and even if losses occur, they will remain within tolerable limits. Overall production remains stable. However, due to high inventories, coke enterprises may actively increase outflows from warehouses next week. Steel mills, with a pessimistic outlook on the end-use market and coke inventories at safe levels, are expected to have moderate restocking demand next week. Therefore, coke enterprises are expected to shift to inventory reduction next week, while steel mills' coke inventories are expected to increase.

Post-holiday, coke enterprises' coke inventories saw a significant decline, partly due to transportation constraints and partly because some coal mines halted production during the Chinese New Year holiday, tightening coking coal supply. As coal mines gradually resume production post-holiday and transportation improves, coupled with low coking coal inventories at some coke enterprises and restocking demand, coke enterprises' coking coal inventories are expected to increase next week.

Post-holiday, coke supply remains ample, and the market holds strong bearish expectations for coke prices. Traders show low enthusiasm for stockpiling in anticipation of price increases. Port coke inventories are expected to decline next week.