Barely had the ink dried on recently-signed sales-purchase contracts for coke than leading merchant coke producers in North, Central and East China on last Friday notified their customers that steelmakers will be paying another Yuan 100/tonne ($15.5/t) at least when next they purchase merchant coke – as soon as from May 1.
Yet again the coke makers cited restrictions to coking operations to argue their case, though their hike demand is their fourth within just two weeks and was tabled only 48 hours after their previous hike materialised, Mysteel Global notes.
“Coke demand has continued to grow, while coking plants’ costs have kept climbing, impacted by the very fast increase in coal prices,” a coking plant located in North China’s Hebei argued in its statement circulating in the market on April 30.
As of April 29, Mysteel’s national composite coking coal price had firmed by another Yuan 21.4/t on week to Yuan 1,186/t including the 13% VAT, or a new high since September 5, 2019.
Plus, coking operations are being seriously affected by the inspections being conducted in Shanxi, Hebei and Henan provinces to check the pollution control facilities of coke makers, the company explained, saying that these checks had exacerbated the supply tightness of coke. It said that from May 2, it will raise its price for dry-quenching coke by Yuan 120/t and by Yuan 100/t for wet-quenching coke, according to the statement.
Pay-back time for the coke makers?
The similar adjustment was announced by a Shanxi-based coking plant on last Friday too, which also argued that its coking margin had narrowed considerably since the coke price had declined dramatically over late February-late March, tumbling by some Yuan 800/t in total.
A Shanghai-based analyst agreed, commenting that the fast rebound in coke prices recently was partially in response to steelmakers “aggressively” cutting coke prices last month.
“The steelmakers’ pre-holiday procurement has been very active, even with the fast-growth in coke prices,” said a Shanxi-based industry source, referring to China’s Labour Day holiday over May 1-5. He anticipated the steelmakers may have to accept today’s adjustment in order to secure some product, as the margins they’re winning for their finished steel right now are very healthy. On April 29, Mysteel’s assessment for the average margin that integrated steel mills are earning on rebar remained at a high level of Yuan 922.9/t.
Throughout April, the rounds of inspections of environmental protection procedures among coke makers were among the central supports for domestic coke prices, Mysteel Global noted. From April 6, the central government has sent inspection teams to eight provinces and regions nationwide for month long environmental checks, as reported.
Beijing’s environment crackdown seen buoying the market
Coke makers caught up in the blitz include those in the country’s coal mining and coking hubs of Shanxi, Henan and Anhui provinces, and several state owned companies and even city governments were named and shamed in a public notification for falling behind in the area of pollution control.
For example, five coking plants in Shanxi’s Jinzhong city whose combined coke capacity tops 10 million tonnes/year were found to have started constructing new facilities in early 2019 without completing energy-saving or environmental evaluations, according to a recent post by China’s Ministry of Ecology and Environment (MEE). Further investigations are underway. No announcement has been made regarding the penalty the plants will suffer.
In another MEE post on April 28, the Anyang city government in Henan was criticized for not fully completing the target to eliminate local obsolete coking capacity. By the end of 2020, Anyang’s total coking capacity was 10.2 million t/y, which was 58% in volume compared to the city’s steel capacity. The MEE post noted that the coke-making capacity exceeded Beijing’s order to control the percentage coking to steelmaking capacity to 40%, according to the post.
Problems regarding coal mine operations were uncovered too, MEE noted, pointing out that a large-sized coal mine with 15 million t/y of raw coal capacity (mainly coking coal) in Shanxi was found to have serious dust and water pollution issues. Further investigations are underway, the ministry said.
The impact of the environmental checks is clearly reflected in the coke output, Mysteel data shows. Over April 22-28, total coke production among the 230 Chinese independent coking plants that Mysteel regularly samples averaged 592,900 tonnes/day – a 14-month low and notably well below the 634,800 t/d average for the survey period of March 25-31. On April 29, their total coke stocks also hit a low since February 5.
Source: Sean Xie & Russ McCulloch
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