Since the beginning of this year, affected by the epidemic situation and the implementation of coking capacity reduction policy, the coke market has been running in shock and the price has fluctuated. Recently, the price of coke began to rise for the eighth round. Can this round of price rise be sustained? What is the future trend of coke market? These topics have become the focus of the industry.
Coking capacity reduction effect
The novel coronavirus pneumonia caused the production stoppage and shutdown of the manufacturing industry in the beginning of this year, which directly affected the steel market and the steel price dropped sharply. At the end of February, CSPI (steel composite price index) was 100.39 points, down 5.09 points on a month on month basis, with a decrease rate of 4.83%; and a year-on-year decrease of 7.29 points, with a decrease rate of 6.77%.
Due to the obvious reduction of steel demand and maintenance of blast furnace, the release of production capacity is hindered and the output is reduced. According to the statistics of China Iron and Steel Industry Association, in March 2020, the key statistics of iron and steel enterprises produced 57.6261 million tons of crude steel, a year-on-year decrease of 2.0%; the daily output of crude steel was 1858900 tons, a year-on-year decrease of 2.0%, and a month on month decrease of 1.25%. The decrease of coke demand in steel mills has led to a continuous drop in the market price of coke. By the end of April, the price of coke has fallen for five consecutive rounds, with a cumulative decrease of 250 yuan / ton. At this time, most coke enterprises are in the state of low profit operation, some even lose money.
2020 is the decisive year to win the three-year action plan of the blue sky defense war. All localities will strengthen the efforts of environmental protection, so as to accelerate the process of coking enterprises to reduce production capacity. For example, Hebei, Henan, Shanxi, Jiangsu, Shandong and other places have introduced coking capacity reduction policies, coking capacity gradually reduced, coke production decreased, making the coke market supply tight. According to the data of the National Bureau of statistics, from January to August this year, China’s coke output was 310.3 million tons, a year-on-year decrease of 1.4%; while from January to August, the output of pig iron was 589.4 million tons, a year-on-year increase of 3.4%. The phenomenon of “weak supply and strong demand” is emerging.
With the gradual emergence of the de capacity effect, since August, there have been waves of price rises in the coke market, up to now, it has been rising for eight consecutive times. Industry insiders believe that the rise in the price of coke benefited from coking enterprises to reduce capacity. For example, in the first ten days and the middle of September, the second round of price increase was opened in Wuhai and surrounding areas of Inner Mongolia, with an increase of 50 yuan / ton. In some areas, the third round of price increase was started, and there was a long queue waiting for coke loading outside the factory area of local coke enterprises. It is difficult for traders in Inner Mongolia to purchase, so they go to Xinjiang to mobilize coke resources. According to statistics, from January to November 2020, the country’s total coking capacity will be eliminated by 40.67 million tons, including 19.4 million tons withdrawn from Shanxi Province; the accumulated new coking capacity is 31.1 million tons, and the net elimination is 9.57 million tons. In particular, since October, Shanxi coking capacity has generally exceeded expectations. Henan began to implement the 4.3m coke oven capacity elimination policy at the end of November. Hebei Handan region started the withdrawal of backward coking capacity. It is estimated that there will be 22.33 million coking capacity to be withdrawn in December in Shanxi, Henan, Hebei and other places.
The rising voice of “gold nine” of coke price is gradually rising, and the rising sound of “silver ten” is still the same. Subsequently, the coke market began to rise in the fourth and fifth rounds, and the price rise continued until November. In late November, the eighth round of price increase was launched in the coke market, with a further increase of 50 yuan / ton, with a cumulative increase of more than 350 yuan / ton. As of November 30, the price of coke in Tangshan was 2150 yuan / ton, up 13.2% and 22.9% respectively over the beginning of this year and the same period last year. At the beginning of December, the monthly long-term price of each mine is still rising, and the rising tide of coke market is still continuing.
Three factors support coke price
As for the future market of coke, operators and industry insiders believe that the coke market will maintain a good running trend at the end of the year and at the beginning of the year. In the short term, the situation of weak supply and strong demand for coke is impossible to fundamentally change, and the price is easy to rise but difficult to fall. The main reasons are as follows:
First, it is difficult to increase the supply of coke market. In December, the task of coking capacity removal is still arduous. The process of 4.3m coke oven capacity exit in Shanxi, Hebei, Henan and other regions is accelerating. There will be 22.33 million tons of coking capacity to be withdrawn, but only 10.54 million tons of coking capacity can be added. Therefore, there is still a certain gap in coke supply from December to January and February next year. Due to the continuous decline of coke production, the supply of coke market will continue to be tight in the later stage.
According to the data of the National Bureau of statistics, China’s coke output in October was 40 million tons, with a decrease of 591000 tons on a month on month basis, with a decrease rate of 1.46%; the average daily output of coke in China was 1290300 tons, with a decrease of 62700 tons on a month on month basis, with a decrease rate of 4.63%. Industry insiders believe that coke production at the end of the year and at the beginning of the year is also difficult to increase significantly.
Second, the “anxious demand” is still strong. In November, the domestic steel market was not weak in the off-season, the prices rose sharply, and the enthusiasm of steel mills for production was high. Although some steel enterprises in some areas are affected by environmental protection and production restriction, there is no obvious limitation or reduction in the production of blast furnace, and the daily average output of hot metal is high. According to the statistics of China Iron and Steel Industry Association, in late November 2020, the key statistics show that iron and steel enterprises have produced a total of 18.4367 million tons of pig iron, with an average daily pig iron output of 1843700 tons, an increase of 5.03% year-on-year. It can be seen that the steel industry’s demand for coke has not weakened, which will support the high price operation of coke in the later period.
Third, the national steel consumption demand will continue to grow in 2021, and the intensity of “coke demand” is still strong. According to the analysis and prediction of insiders, in 2021, China’s economy will continue to develop steadily, infrastructure construction such as “two new and one heavy” will be strengthened, the production and marketing situation of the manufacturing industry will continue to improve, and the strength of “steel demand” is relatively strong. Industry insiders predict that the apparent consumption of crude steel will exceed 1.06 billion tons in 2021, with an increase of more than 4%. “Steel demand” drives “coke demand”, and it is expected that the overall coke market will continue to run well.
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