Coke Prices to Remain Stable before CNY Holiday

SHANGHAI, Jan 13 (SMM) - At present, the coke prices have been cut for two rounds, with a cumulative reduction of 200-220 yuan/mt. Most coking companies already struggled with losses, and several suffered a loss of roughly 200 yuan/mt. Then, is a third round of price cuts possible before the Chinese New Year holiday?

First of all, some coking companies already trimmed their production due to losses, with the capacity utilisation rates of coke ovens down from 79.7% to 78.6%. If coke prices are further reduced, most coking companies will curtail their production, which will narrow the coke supply and subvert the current supply-demand structure.

Next, some coal mines were already closed for the CNY holiday. The tight supply of coking coal helped mines maintain stable quotes. Generally, the coal prices were firm except for some overly priced varieties whose prices were lowered. In this case, the cost support for coke price was still there. Then, there are coal imports from Australia, which were mainly thermal coal. The imports are expected to a negative impact on the prices of coal and coke in the long run, but coking coal prices will be unaffected in the short term.

Finally, the two straight rounds of coke price reductions helped restored some profits for most steel mills. These plants now refrain from bargaining down coke prices for a fear of a“retaliatory”spike in the prices after the holiday.

In conclusion, a third around of coke price cut is rather unlikely before the CNY holiday, so coke prices are expected to remain stable in the coming week.