SHANGHAI, Oct. 25 (SMM) -- At present, coking coal prices have already advanced to high level, and possibility for coking coal prices to advance further will be slim, which will limitedly support coke prices. Meanwhile, steel market remained sluggish, profits at steel mills were further squeezed due to sluggish condition at steel mills, which will further weigh on coke prices. Coke prices have advanced to certain extent since September due to demand for spot coke, but such support from fundamental is waning at present.

According to Steelease sources, China’s coke capacity has exceeded 500 million mt at present, and coke output was around 420 million mt in 2011, with coke overcapacity remaining unchanged. According to data from the National Bureau of Statistics, China’s output of crude steel in the first eight month in 2011 was 470.857 million mt. Based on the assumption that to produce one mt of crude steel will consume 0.45 mt of coke, China’s coke demand will be 211.8857 million mt in the first eight months in 2011, lower than 285.22 million mt of coke demand in the first eight month in 2011. Although nonferrous metal smelting also has demand for coke, such demand only accounts for 10-15% of total coke demand.

According to estimation, coke supply surplus was around 40 million mt in the first eight months in 2011. At present, coking enterprises are under unfavorable position in industrial chain, pressed by steel mills and coal producers. Under severe competition, some coking enterprises may initially cut prices. In that context, large sized coking companies with industrial chain advantage and by-products may manage to survive, while small sized coking enterprises may not survive, which may help consolidate coke industry.