SMM Analysis: Coke Prices On Track For Seventh Or Even Eighth Round Of Cuts

After the Labour Day holiday, coke prices lost 100 yuan/mt, marking its sixth round of price cuts. At present, the price of coke has seen a cumulative drop of 500-550 yuan/mt. Market sentiment is still pessimistic, and negative factors still dominate. The negative factors are as follows:

1. The continued collapse of coke cost. Since the first round of coke price cuts on April 3, coking coal prices have begun to fall synchronously. As of May 6, coking coal prices have fallen 620 yuan/mt, which significantly lowered coking plants’ costs.

Some coking enterprises in Shanxi saw severe coke inventory accumulation. From April 1 to the present, the coke inventory of coking enterprises has increased from 388,000 mt to 658,000 mt, an increase of 69.6%, among which the increase in inventory in Shanxi was the most obvious. However, due to the simultaneous decline in coking costs, most coking companies maintained normal production. As the supply of coke has not been reduced, coking companies’ inventories are under risk of further accumulation.

2. Steel prices continued to fall, and some steel mills announced blast furnace maintenance plans. The end market of steel is still poor, and steel prices keep falling. Steel mills try to lower coke prices to cope with poor profitability. Some steel mills, mostly those in Shanxi and Shaanxi, put blast furnaces under maintenance due to losses. Blast furnace maintenance further hit coke demand and will exacerbate the accumulation of coke stocks in some areas.

To sum up, abundant supply and the lack of cost support will put coke prices at risk of the seventh or eighth round of cuts.