Coking Companies and Steel Mills Once Again Engage in a Tug-Of-War

SHANGHAI, Nov 11 (SMM) - On November 10, the third round of coke price cut was implemented. However, some coking enterprises in Changzhi, Shanxi refused to accept the price cut.

Although steel mills still intended to bargain down the prices, the market sentiment has shifted, which means that the possibility of fourth round of coke price cut will be low. The main reasons are as follows:

First, although coking companies still purchased coking coal on rigid demand, the quotes of coal mines already stabilised after the previous price cut. The market sentiment improved as traders started purchasing coke, which once again supported the coke prices.

Second, according to SMM survey, the capacity utilisation rate of coke oven across the country stood at 69.8% this week, down 1.3 percentage points over the week. In particular, that in Shanxi dropped 1.3 percentage points from a week ago to 66.5%. As the supply of coke decreased amid falling coke prices, traders started to stock up, and coke companies became more optimistic.

Third, the maintenance in steel mills was suspended, and the pig iron output was maintained at a high level. This, coupled with the rather low coke prices, boosted the purchasing demand for coke.

According to SMM analysis, there is limited room for coking coal prices to fall amid lower coke supply and improving purchasing willingness among traders and steel mills. Since the fourth round of coke price cut is highly unlikely, the coking companies and steel mills will enter the play again as contradictory forces.