Posted on 30 Dec 2021
Installed capacity for producing metallurgical coke throughout China will continue growing in 2022, but demand will struggle to keep pace, according to Mysteel's annual forecast for the industry. As a result, the country's coke output is expected to decline next year while the average margin that producers can earn will remain at a comparatively low level. Capacity 'swap' proceeding, total coking capacity to grow further
During 2022, China will continue eliminating obsolete coking capacity across the country, as part of Beijing's push to protect the environment and raise efficiency in resources consumption. At the same time, the commissioning of advanced coke-making capacity will continue, as part of the country's plans to optimise the coking sector's industrial structure and reduce carbon dioxide and pollutant emissions, Mysteel forecast.
Throughout next year, the country's net coking capacity is seen growing by 17.6 million tonnes/year, far lower than the net growth for 2021 estimated at 25.1 million t/y, according to Mysteel's survey based on the preliminary plans of the country's coking enterprises.
In detail, the net growth in capacity will be maintained during most of next year, except for December when Mysteel estimates that the country's coking capacity will decline by 21.6 million t/y the same month, based on the survey data.
However, there's a risk that the commissioning of some new coking capacity next year may be delayed, the report warns, citing the increased scrutiny that the development and construction of heavily-polluting and energy-intensive industrial projects is attracting from central and local governments these days. Nonetheless, 2022 will see at least 10 million t/y of net growth in coking capacity achieved, Mysteel noted.
In fact, twelve months ago Mysteel had forecast that during 2021, China would witness net growth in coking capacity of some 36 million t/y, but due to the delay of some new projects in the country's core coking hubs, the actual net growth this year is likely to be smaller at 25.1 million t/y.
Table 1: China's coking capacity swap over 2021-2022
(Unit: million t/y)
|
|
2022 |
2021 |
|
Commissioning |
71.3 |
50.5 |
|
Elimination |
53.7 |
25.4 |
|
Net |
17.6 |
25.1 |
Source: Mysteel
Coke output to drop on weakened demand
Despite the increase in coke-making capacity being forecast for next year, Chinese coke production is forecast to drop by 1.1% or 4.9 million tonnes on year to 421.1 million tonnes in 2022, with the average coking capacity utilisation rate to decline throughout the year, Mysteel noted.
Although molten iron production among Chinese blast furnace steelmakers is expected to moderately recover during the first half of 2022, output throughout the full year may continue to slide, with the result that the country's coke demand could soften by 2.2% on year, Mysteel anticipated.
Table 2: China's coke output, demand, foreign trade and inventory by 2022
(Unit: million t)
|
|
2022 |
Y-o-Y (%) |
|
Output |
421.05 |
-1.1 |
|
Demand |
412.65 |
-2.2 |
|
Imports |
1.6 |
14.3 |
|
Exports |
7 |
7.7 |
|
Inventory |
13.5 |
28.6 |
Source: Mysteel
The recovery of molten iron production during H1 2022 is expected to give a boost to domestic coke prices over the same period, Mysteel notes. However, the softening of demand in general could see the country's average coke prices lose ground next year, with profit margins also narrowing.
Coking coal availability to rise, but supplies of premium resources to stay tight
Domestic production of coking coal is forecast to grow during 2022, supported by the country's measures to secure coal supplies, with Mysteel forecasting that the country's total output will rise 1.1% on year to 512.5 million tonnes. If molten iron output across China does drop as expected next year, the country's total coking coal inventories may mount, impacting average prices, Mysteel has forecast.
But there will be exceptions, the report notes. Domestic supplies of premium coking coal will remain tight next year, as the commissioning of large-sized coke ovens and blast furnaces may require a higher ratio of premium coking coal - at a time when domestic availability of such quality coal is limited, according to the forecast.
China's coking coal imports are likely to increase too next year, with seaborne resources from Russia, the U.S. and Canada expected to climb further, Mysteel notes. Moreover, several million tonnes of Australian coking coal remain at Chinese ports awaiting Customs clearance after processing was halted last year. This coal will finally be cleared next year, resulting in additional 'imports', Mysteel forecast.
On the other hand, the export of Mongolian coking coal to China in 2022 will remain uncertain as the trade this year was disrupted several times by COVID-19 pandemic situation in Mongolia, Mysteel noted.
Despite the forecast of higher coking coal imports overall next year, the volume may be still insufficient to fully ease the domestic supply tightness of premium coking coal, the report anticipated.
Table 3: China's coking coal output, demand, foreign trade and inventory by 2022
(Unit: million t)
|
|
2022 |
Y-o-Y (%) |
|
Output |
512.5 |
1.1 |
|
Demand |
560 |
-1.1 |
|
Imports |
60 |
21.2 |
|
Exports |
0.4 |
400 |
|
Inventory |
34 |
21.5 |
Source: Mysteel
Source:Mysteel Global
