Posted on 27 Jan 2021
After accepting almost weekly price increases since last August for the coke they must buy from coke producers, some Chinese steelmakers have finally started pushing back, Mysteel Global has learned.
On Monday, several small- and medium-sized steelmakers mostly located in North China’s Shanxi province launched their first determined attempt to cut coke procurement prices by Yuan 100/tonne ($15.4/t). The mills concerned wish to remain anonymous, but a January 24 statement from one of them stated that the decision to cut coke prices – which collides head-on with demands by coke makers in Shanxi for another Yuan 100/t rise this week – was made to cushion high raw materials cost.
Meanwhile, the parties in this tussle from both sides cannot be regarded as leading players for their respective industries nationwide, but the market participants will be closely monitoring the friction heating up between them because any sign of victory or compromise will immediately spark a wider industry response, Mysteel Global notes.
For their part, the coke makers again argued that the Yuan 100/t hike was justified in the context of rising coking coal prices, the continuing tight coke supplies and higher transportation charges, Mysteel Global noted. As of January 22, Mysteel’s national composite coke price had reached an over 12-year high, rising by another Yuan 81.5/t on week to Yuan 2,587.7/t including the 13% VAT.
The statement from the steelmaker, however, indicated that it was not convinced at all. “(Domestic) coke prices have increased on 14 occasions nonstop, rising by Yuan 900/t in total, and the coking plants’ margins commonly exceed Yuan 900/t, while steel mills are striving hard to just break even,” it rebutted.
The steelmaker had requested that its coke suppliers respond to its Yuan 100/t cut request before January 25, according to the company. On Monday, Mysteel Global also noted that other steelmakers in North China had reached the same conclusion regarding lower prices, citing the high coke margins their sellers were enjoying, against their own thin steel margins.
As of January 21, the average coking margin of the 30 Chinese independent coking plants rose another Yuan 61/t on week to Yuan 913/t, making for a new record high since Mysteel started the weekly survey in January 2017.
A coke procurement official with a steel plant in East China told Mysteel Global that given the weakening steel sales, his plant will not agree to further hikes in coke prices after accepting the fourteenth increase. “We have received few new orders (for some steel products), as our ex-works prices are higher than spot market prices,” he said, though he grumbled that they were facing declining coke stocks at hand.
Chinese steelmakers, thus, may have to conceded again to the higher coke prices, anticipated a Shanghai-based analyst. “Some steel mills have started to cut back on their operations, but this will not be sufficient to help slow the decline of their coke stocks,” he explained.
As of January 21, total coke stocks at the 110 Chinese steel mills hit a 47-month low of 3.9 million tonnes, and on the same day, coke stocks at the 230 independent coking plants were also at a comparatively low level of 449,500 tonnes, or nearly 60% lower on year, according to Mysteel's tracking.
Source:Mysteel Global
