【SMM Coking Coal Analysis】Weakening Coking Cost Support, Coke Price Hike Expected to Continue to Fall Through Next Week

1. According to the SMM survey, the profit per mt of coke this week was 49.4 yuan/mt, with many coke enterprises maintaining profitability.

From a price perspective, coke prices remained stable this week, and the profit per mt of coke was not affected by price fluctuations. From a cost perspective, coking coal supply was stable, downstream purchases were cautious, mainly purchasing as needed, coal mine shipments were moderate, online auctions saw more declines than increases, and the number of failed auctions increased, leading to a slight decrease in coking costs.

Next week, the expected increase in coke prices may continue to fall through, maintaining stable operations, with minimal impact on coke enterprise profits. However, the number of failed online auctions for coking coal may expand, reducing coking costs for coke enterprises, thus it is expected that most coke enterprises will further expand their profits.

2. According to the SMM survey, the coke oven capacity utilization rate this week was 75.3%, up 0.2 percentage points WoW, with the coke oven capacity utilization rate in Shanxi at 75.5%, up 0.1 percentage points WoW.

From a profitability perspective, most coke enterprises were profitable this week, with moderate production enthusiasm. From an inventory perspective, coke enterprise shipments were good, and overall coke inventory remained low, positively impacting production.

Subsequently, most coke enterprises will see increased profits, and with their own coke inventory at low levels, production enthusiasm will remain high. Meanwhile, steel inventory continues to decline, and steel mills still have profits per mt of steel, so short-term pig iron production at steel mills may remain high, creating rigid demand for coke. In summary, the coke fundamentals are balanced, with minimal imbalance, and with coke enterprise profitability moderate, the coke oven capacity utilization rate may remain high next week.

3. This week, coke enterprise coke inventory was 291,000 mt, down 18,000 mt WoW, a decrease of 5.8%. Steel mill coke inventory was 2.679 million mt, up 36,000 mt WoW, an increase of 1.4%. Port coke inventory was 1.56 million mt, down 80,000 mt WoW, a decrease of 4.9%. Coke enterprise coking coal inventory was 2.641 million mt, up 9,000 mt WoW, an increase of 0.3%.

This week, coke enterprise coke inventory continued to destock, while steel mill coke inventory saw a slight decline. Overall production enthusiasm at coke enterprises was good, with a slight increase in coke supply. Meanwhile, short-term pig iron production at steel mills remained high, creating rigid demand for coke, and with the approaching Labour Day holiday, some steel mills with low coke inventory engaged in pre-holiday restocking, keeping coke enterprise coke inventory low. This week was the week before the Labour Day holiday, with some steel mills purchasing to restock, leading to an increase in steel mill coke inventory.

Subsequently, coke supply will remain high and stable, while short-term pig iron production at steel mills remains high, creating rigid demand for coke. Additionally, Labour Day holiday restocking continues, so it is expected that coke enterprise coke inventory will remain low next week, with a slight increase in steel mill coke inventory.

This week, coke supply increased slightly, and steel mills engaged in restocking. With coke futures delivery completed, traders actively shipped goods, so it is expected that port coke inventory will decrease next week.

This week, coke enterprise coking coal inventory increased, with good sales and increased demand for coking coal. Coking coal prices are already at reasonable levels, and some coke enterprises with low coking coal inventory began purchasing to restock. Subsequently, the upward trend in coking coal prices was interrupted, with online auctions seeing more declines than increases, and downstream purchases remained cautious. Even with the approaching Labour Day holiday, it is difficult to stimulate purchasing demand, so it is expected that coke enterprise coking coal inventory will fluctuate rangebound next week.