[SMM Coke & Coal Analysis] Profits Under Pressure, Coke Producers' Operating Rates May Continue to Decline Next Week

1.

According to the SMM survey, the profit per ton of coke was 43.7 yuan/mt this week, with profits improving for most coking enterprises, although some still incurred losses.

This week, coke prices remained stable, having no negative impact on coking enterprises' profits. However, in terms of costs, coking coal prices also remained stable this week, with coal mines not offering further concessions.

Looking ahead, due to the overall loose supply-demand pattern and low downstream purchase willingness, coke prices are expected to fall further. However, the decline in costs will narrow, making it difficult to promptly restore coking enterprises' profits. It is anticipated that coking enterprises' profits will still face downward pressure next week.

2.

According to the SMM survey, the coke oven capacity utilization rate was 74.9% this week, down 0.49 percentage points WoW. In Shanxi, the coke oven capacity utilization rate was 75%, down 0.4 percentage points WoW.

From the perspective of market conditions, coke prices continue to be under pressure, with downstream steel mills showing low purchasing enthusiasm. Most steel mills' coke inventories are at medium to high levels, lacking restocking demand. Meanwhile, affected by environmental factors and inventory accumulation, some coking enterprises have slightly cut production, leading to a tightening of coke supply. Overall, the operating rate of coking enterprises declined this week, with some regions experiencing active production cuts due to stricter environmental protection inspections and loss pressures.

Looking ahead, based on the coke oven capacity utilization rate of coking enterprises this week, it is expected that the coke oven capacity utilization rate will continue to decline next week. However, attention should be paid to the impact of environmental protection policies and changes in market demand on coking enterprises' production.

3.

This week, coking enterprises' coke inventories stood at 466,000 mt, up 28,000 mt MoM, a 6.4% increase. Coking enterprises' coking coal inventories were 2.384 million mt, down 67,000 mt MoM, a 2.7% decrease. Steel mills' coke inventories were 2.505 million mt, down 35,000 mt MoM, a 1.4% decrease. Coke inventories at the two ports remained flat MoM at 1.27 million mt.

This week, the operating rate of coking enterprises declined, but downstream purchasing enthusiasm was low, resulting in poor coke sales and continued inventory accumulation. In terms of raw materials, coking enterprises remain cautious about their demand for coking coal, with a sluggish market trading atmosphere and a continuous decline in coking enterprises' coking coal inventories. For steel mills, their coke inventories are generally at medium to high levels, lacking restocking demand. They mainly purchase as needed, with some steel mills with high coke inventories even controlling arrivals.

Looking ahead, the overall supply-demand pattern for coke is loose, and the coke market is expected to be in the doldrums in the short term. The expectation for a fourth round of coke price reductions has strengthened, and coking enterprises' shipments may continue to be hindered, with inventory still at risk of accumulation. In terms of raw materials, coking enterprises remain cautious about their demand for coking coal, with a sluggish market trading atmosphere. Coking coal prices may continue to be under pressure, with insufficient purchase willingness from coking enterprises, and their coking coal inventories may continue to decline. On the steel mill side, steel mill profits are moderate, but pig iron production has peaked, and steel mills have the intention to continue driving down coke prices. As a result, steel mills' coke inventory may continue to decline slightly. Regarding port inventory, coke enterprises are facing difficulties in selling their products, and downstream purchase willingness is low. Therefore, it is difficult for port coke inventory to be volatile in the short term.