[SMM Coal and Coke Analysis] Continued Price Cuts: Coke Enterprises Expected to Face Widespread Losses Next Week

1. According to the SMM survey, coke profit per mt stood at -2.9 yuan/mt this week, with most coke enterprises operating near the break-even point.

From a pricing perspective, coke prices remained stable this week, and coke enterprises' profit per mt was not affected. From a cost perspective, coal mines have recently focused on safe production, keeping coking coal supply stable. However, after a prolonged period of continuous price declines, the downward space for coking coal prices is limited, and the pace of price reductions is slow, making it difficult to restore coke enterprises' profitability.

Next week, the eleventh round of coke price cuts is expected, and coking coal prices may experience supplementary declines. While coking costs may slightly decrease, they are unlikely to offset the losses caused by price cuts, and most coke enterprises are expected to fall into losses.

2. According to the SMM survey, the coke oven capacity utilization rate this week was 73.7%, down 0.1 percentage points WoW. In Shanxi, the coke oven capacity utilization rate was 74.1%, down 0.2 percentage points WoW.

From a profitability perspective, most coke enterprises are at the break-even point or experiencing slight losses, with minimal impact on production. From an inventory perspective, the pressure on coke enterprises to ship goods has eased, and overall coke inventory continues to decline, reducing the negative impact on production.

Moving forward, most coke enterprises may fall into losses, but these remain within a tolerable range, with only a small number of enterprises expected to reduce production. Coke supply may slightly decrease. However, the recovery of the end-use market remains slow and below expectations, while coke inventories at steel mills remain at safe levels, leading to purchasing as needed. In summary, the fundamentals of coke remain relatively loose. Coupled with losses at some coke enterprises, production enthusiasm is suppressed, and the coke oven capacity utilization rate at coke enterprises is expected to slightly decline next week.

3. This week, coke enterprises' coke inventory was 529,000 mt, down 89,000 mt (-14.4%) WoW. Steel mills' coke inventory was 2.743 million mt, down 4,000 mt (-0.1%) WoW. Port coke inventory was 1.41 million mt, up 80,000 mt (+6.0%) WoW. Coke enterprises' coking coal inventory was 2.336 million mt, down 41,000 mt (-1.7%) WoW.

This week, coke enterprises continued destocking coke, while steel mills' coke inventory fluctuated rangebound. Some coke enterprises fell into losses, reducing production enthusiasm and tightening coke supply. Additionally, some coke enterprises transferred coke to ports, reducing their own inventory pressure. The steel market performed moderately this week, and steel mills anticipated the eleventh round of coke price cuts. Furthermore, the Two Sessions announced crude steel reduction policies, suppressing steel mills' purchasing sentiment, leading to purchasing as needed.

Moving forward, some coke enterprises may continue to reduce production, tightening coke supply. However, steel mills' end-use market demand remains moderate, and their coke inventories are at safe levels, leading to purchasing as needed. Next week, coke enterprises are expected to continue destocking, while steel mills' coke inventory may fluctuate rangebound.

This week, coke supply began to tighten, with limited room for cost reductions. Combined with coke enterprises transferring coke inventory to ports, port coke inventory is expected to increase next week.

This week, coke enterprises' coking coal inventory slightly declined, mainly because the downward space for coking coal prices is limited after a prolonged period of continuous declines, and the pace of price reductions is slow. Even though downstream acceptance of current coking coal prices remains low, significant further price drops are unlikely. Some coke enterprises with low coking coal inventories have started purchasing. Moving forward, the downward space for coking coal prices is limited, and some coke enterprises have restocking needs, increasing their purchasing enthusiasm. Next week, coke enterprises' coking coal inventory is expected to stabilize and fluctuate rangebound.