SMM daily comment on domestic coking coal and coke market (Aug 18)

SHANGHAI, Aug 21 (SMM) –

Since the fifth round of coke price increase was proposed on August 7, bitter rivalry among coking plants was reported. However, subtle changes appeared in the market. According to SMM research, capacity utilization rate of coking plants from August 7 to August 18 hiked to 78.8%, an increase of 1.4 percentage points WoW. Capacity utilization rate of BFs increased from 92.8% to 93.5% for the same period. Therefore, tight supply-demand fundamentals of coke eased.

On the cost side, with restart of coal mines that stopped or reduced production due to heavy rains, safety and environmental inspections, supply of coking coal increased. In addition, rigid demand from coking plants was felt, and they showed no willingness to refill stocks. Besides, traders started cashing out, further giving participants jitters. Some coal prices lowered by 30-100 yuan/mt this week. Cost support for coke market may continue to weaken next week.

In addition, last week's social financial data was released, which was far below expectations. Impact of the real estate related data released this week was also negative. Furthermore, implementation of crude steel production restrictions blunted expectations on long-term demand for coke. However, PBC cut interest rates by 10-15 basis points, but was still difficult to warrant pick-up of coke market.

Weighed down by waning cost support, easing of tight supply-demand fundamentals and growing bearish sentiment, coke prices may creep down next week, and the first round of coke price dips of 100-110 yuan/mt is expected to unfold.