Rising production costs, can the price increase in the coke market continue?

Release:2020-10-04   Edit:Admin   From:Rising steel grating

 

　　 In the first half of this year, due to the impact of the new crown pneumonia epidemic, domestic coke production and prices fell. According to data from the National Bureau of Statistics, in the first half of 2020, my country's coke production was 228.86 million tons, a decrease of 2.5% year-on-year, which was 1.6 percentage points narrower than the decline in the first quarter. Among them, the coke output of steel coking enterprises was 54.677 million tons, an increase of 0.8% year-on-year; the coke output of other coking enterprises was 174.009 million tons, a year-on-year decrease of 3.5%. Specific performance:

 

　　 The domestic coke market price is at a low level. In the first half of the year, the average price of coke with a particle size greater than 40 mm was 1,816 yuan/ton, a year-on-year decrease of 10.7%, which was only 0.3% smaller than the first quarter; the average price of coke with a particle size of 25 mm to 40 mm was 1,734 yuan/ton , A year-on-year decrease of 11.9%, which was 0.7 percentage points smaller than the decline in the first quarter.

 

　　 The pressure on coke sales has increased, and the efficiency of coke production enterprises has declined. In Shanxi Province, the main coke production area, the coking industry achieved operating income of 83.28 billion yuan in the first half of the year, a year-on-year decrease of 15.6%; the total profit realized was 2.49 billion yuan, a year-on-year decrease of 57.7%. However, some coke manufacturers in other regions have no profits or even made losses.

 

　　 In July, the coke market wandered in a weak and sluggish situation, and prices fluctuated and fell. According to feedback from traders, the price of coke in the coke market fluctuated and fell in early July, and the purchasing prices of coke by iron and steel companies in Shanxi, Hebei, Shandong and other places continued to drop. Since then, for two consecutive weeks, the price of coke has been on a downward trend. Steel mills have lowered the purchase price of coke for three consecutive rounds, prompting an overall decline in coke market prices, with a total drop of 150 yuan/ton.

 

　　 In this case, the willingness of coking companies to increase the ex-factory price of coking coal has increased significantly. In mid-August, the market price of coke began to rise for the first time, and the prices of secondary metallurgical coke in Shanxi, Hebei, Shandong, Inner Mongolia, Shaanxi, Heilongjiang and other places all increased by 50 yuan/ton. On August 14, the price of first-class metallurgical coke in Linfen, Shanxi was 1,800 yuan/ton, the price of semi-first-class metallurgical coke in Tangshan, Hebei was 1,860 yuan/ton, and the price of semi-first-class metallurgical coke in Rizhao Port was 1,900 yuan/ton.

 

　　 What is the reason for the price increase of coke?

 

　　 What is the reason for the price increase in this round of coke market? The industry analysts believe that: coke companies control the release of production capacity, the growth rate of output has narrowed, and the coke inventory has declined. The manufacturers are optimistic about the market outlook and are more willing to stand up prices, which has pushed up coke prices.

 

　　According to the National Bureau of Statistics, in July 2020, the national coke production was 39.97 million tons, an increase of 0.3% year-on-year; from January to July, the national coke production was 268.95 million tons, a year-on-year decrease of 2.0%. By mid-August, the coke inventory of 100 independent coking enterprises had fallen by 40,000 tons to 226,000 tons, of which the decline in North China was significant. Traders are optimistic about the market outlook and are highly motivated to inquire and obtain goods. In addition, the coke inventory of some steel plants is at a normally low level, and there is a need to purchase replenishment. The coke inventory of 80 steel mills fell by 236,000 tons to 5.668 million tons, of which the coke inventory of steel mills in North China dropped significantly. Some coking companies have slowed down their shipments. In addition, due to the rainy season, transportation in some areas is restricted, coke arrivals from steel plants have declined, and coke inventories have continued to decline. These superimposed effects gradually appeared, prompting the domestic coke market price to stop falling and rebound and began to rise.

 

　　 Coke prices may continue to rise

 

　　 So, can this round of rising coke prices continue? In this regard, operators and industry insiders believe that from the current supply and demand situation and operating situation of the coke market and the willingness of coke companies to increase prices, the price increase in the coke market will continue in September. The second and third rounds of rising prices Will appear as expected.

 

　　 In mid-August, the price of metallurgical coke in North China, East China and other regions rose by RMB 50/ton. In the near future, industry insiders still have bullish expectations, coupled with tight inventories of coke companies in the southwest region, which has a certain pulling effect on the metallurgical coke market prices in the southwest region. The Yunnan-Guizhou coke enterprises indicated that they would raise the price of metallurgical coke in the first half of September.

 

　　 On August 28, individual coke companies in Shanxi and Hebei have sent letters to increase the ex-factory price of metallurgical coke by RMB 50/ton.

 

　　 At present, the coke inventory of some steel plants in Hebei is at a low level, and it is urgent to replenish the inventory, order and urge the coke enterprises. Some coking companies in Shanxi have also recently received notices from steel mills. It is reported that some steel mills in North China and East China will accept the second round of metallurgical coke price increases.

 

Industry insiders said in an interview with a reporter from China Metallurgical News that the current coke inventory of steel mills is low and the purchasing enthusiasm is relatively high, while coke companies have no inventory and shipments are smooth. In the short term, they will continue to bullish coke market prices and have a strong willingness to increase. It is expected that more coke companies will increase the price of metallurgical coke by RMB 50/ton. By then, some steel mills with low coke inventories in North China and East China will accept price increases from coking companies.

 

　　 From this point of view, the second round of price increases in the coke market may be settled, but how long this wave of rising prices can last depends on the following factors:

 

　　 One is the change in coke demand. "Golden Nine and Silver Ten" is the traditional peak season for steel market demand. With active fiscal policies and infrastructure investment and other factors, the industry expects that the effective demand intensity of downstream terminals is expected to increase; and in August, the steel market prices generally fluctuated upward, and some steel prices rose. For example, the market price of cold-rolled sheet in Shanghai has risen by 350 yuan/ton in one month, steel mills are profitable, and the production enthusiasm is high, which stimulates the release of production capacity, and the demand for coke is large.

 

　　 At the same time, a batch of new production capacity will be put into production. According to industry insiders, this year's steel capacity replacement project has entered a release period. According to preliminary statistics, the replacement crude steel capacity is planned to be put into production in 2020 by 73 million tons, with a net increase of about 20 million tons. In the second half of the year, the first phase of the Liugang City Port project and Zongheng Steel's blast furnace will be put into operation, which will further increase market supply and demand for coke will remain at a high level.

 

　　 The second is the change in coke supply. With the price increase in the coke market, the efficiency of coke companies has improved, and the enthusiasm for production has generally increased. In addition, some coke companies have low coke inventories or even no inventory, and they are willing to increase production. At present, coking enterprises in most regions are basically at full capacity, and coke production is expected to increase in the later period, and the tight coke supply situation will be changed.

 

　　 However, environmental protection production restrictions may restrict the release of coke enterprises' production capacity. It is understood that the central environmental protection inspection team has entered Shanxi, and individual large coking companies currently restrict production at about 30%. A few coke companies have also received notifications that metallurgical coke production will decline in the short term. But this is only a short-term impact. At present, a few coking companies have completed environmental protection inspections, and coke ovens will resume normal production. It is expected that the capacity utilization rate of these coking companies will increase slightly in the future.

 

　　 The third is the game between coke companies and steel companies around the price increase of coke. Recently, due to the rising prices of iron ore, scrap steel and other steel raw materials, the production costs of steel mills have been rising steadily, and the rise in coke prices has been resisting. For example, the first round of price increase in the coke market in Northeast China has not been fully realized until late August.

 

　　From the perspective of coke companies, many coke companies have low coke inventories, and many coke companies have zero inventories. Some companies have a strong willingness to increase prices due to environmental restrictions and production capacity. The game between steel companies and coke companies continues. In the short term, the probability of coke companies winning is high.

 

　　Fourth is the change in the import and export of coke. The new crown pneumonia epidemic has had a serious impact on the economies of various countries, affecting the steel industry and steel raw material markets. In the first half of 2020, my country exported 1.758 million tons of coke, a year-on-year decrease of 54.3%; the average export price of coke was US$222.4/ton, a year-on-year decrease of 24.5%; imported 746,000 tons of coke, a year-on-year increase of 1030.8%; the average price of coke imports was US$233.1 /Ton, an increase of 6.2% year-on-year. In July, the import volume of coke continued to increase sharply to 409,900 tons, a year-on-year increase of 663.32%, reaching a record high; during the same period, the coke export volume was 390,300 tons, and the import volume exceeded the export volume for the first time. If the export volume of coke continues to decline and the import volume increases substantially, it will have a certain impact on the domestic coke market supply.

 

　　 Fifth is the change in the market trend of coking coal. It is understood that the production of 1 ton of coke consumes about 1.3 tons of coking coal, so the price of coking coal determines the cost of coke production. At present, the domestic coking coal market is operating steadily. Most coal companies are producing at full capacity. The supply of coking coal is slightly loose. The supply of individual high-quality coal types is tight, and prices have risen slightly. In the short term, the market price of coking coal will not change much. However, rising coke prices will have an impact on the coking coal market. From the historical trend of coking coal and coking coal prices, the response of coking coal prices to changes in coke demand has a certain degree of lag: often coke prices rise first, and after a period of time, coking coal prices follow; or coke prices fall. After some time, the price of coking coal fell. According to this law, the price of coking coal in the later stage may rise with the increase in coke prices, which will drive the increase in production costs of coking enterprises and increase the ex-factory price of coke.