After experiencing nearly 20 trading days of trend decline, early raw material prices high drop risk has been effectively released. Last week (May 16 ~20, the same below), “double coke” (coking coal, coke) futures prices gradually stabilized, the overall trend was wide shock. Among them, the main coke J2209 contract price runs at 3300 yuan/ton ~3520 yuan/ton, the main coking coal JM2209 contract price runs at 2530 yuan/ton ~2730 yuan/ton, thermal coal price maintains a narrow range of fluctuations, market activity still remains depressed.
In coal policy, before the National Development and Reform Commission issued a series of coal price regulation and supervision policies. Recently, the National Development and Reform Commission further proposed that coal production and operation enterprises should not sell coal through reselling to related parties, who then sell coal at substantially higher prices. Shanxi coal (5500 kilocalorie, similarly hereinafter), for example, the reasonable price of ore link long-term trading range is 520 yuan/ton, a local coal enterprises and their controlling coal trade company to sign a long-term contract, agreed to a 450 yuan/ton of ore supply price, but then the trading company for 550 yuan/tons of ore price will be the group of coal sales to the power plant, If the price exceeds the upper limit of the reasonable range of long-term trading price in the local mining link, it can generally be regarded as suspected price gouging. The regulation and supervision policies of the National Development and Reform Commission on coal prices are still being improved.
In addition, according to the Indian Ministry of Finance, in order to ease the country’s high inflation, the Indian government on May 22 for steel raw materials and products import and export tariff policy, including coking coal, coke import tariff from 2.5%, 5% to zero tariff.
At present, India’s domestic coking coal is facing a serious shortage of supply, highly dependent on imports. In 2021, India imported 56.27 million tonnes of coking coal, up 7% from 2020, making it the world’s largest coking coal importer. Among them, Australia is the main source country of India’s coking coal imports. In 2021, India imported 45.06 million tons of coking coal from Australia, accounting for 80% of its total imports, with a year-on-year growth of 19%. Australia has been exporting part of the coal to China in the past and resold it to India. India also imported 3.11 million tons of coking coal from the United States during the same period, down 22 percent year-on-year. Imports of coking coal from Russia were 1.15 million tons, down 65 percent year-on-year. At present, the international coking coal price is running at a high level, and India’s cancellation of coking coal import tax rate is conducive to reducing the import cost, thus alleviating the problem of domestic coking coal import shortage. However, India’s coking coal import tax rate adjustment space is only 2.5%, the impact on global coking coal trade pattern may be limited.
In coke, we have trade relations with India. Data show that in 2021, China’s coke exports will be 6.45 million tons, of which 690,000 tons will be exported to India, accounting for 10.7%; From January to April 2022, China exported 300,000 tons of coke to India, with a cumulative year-on-year growth of about 66.7%. India cancelled its coke import tariff, which is expected to further increase efforts to import coke from China.
Back to the basic coke, last week the coke market as a whole showed a steady increase in supply and demand, inventory remains low, tons of coke profits continue to narrow.
In the near future, the recovery of terminal demand is still not significantly improved, timber consumption is not good, spot sales of steel mills is very difficult, high inventory in the plant, timber prices are still a downward trend shock. Although the upstream raw material coke has been given space, but steel profits have not improved. Data on May 20 showed that the average gross profit of tangshan steel mills in Hebei province was -154 yuan/ton, down 93 yuan/ton week on month. Last week, coke spot prices fell again 200 yuan/ton, so far, coke prices have fallen 600 yuan/ton. Coke price downward pressure also gradually spread to the coking coal end, theoretically, the coking coal purchase price needs to fall 780 yuan/ton to ensure that ton coke profit is not compressed. But from the actual situation, the recent cumulative decline of coking coal is 400 yuan/ton ~700 yuan/ton, ton coke profit is still being squeezed. Last week, the average profit per ton of independent coke enterprises narrowed to about 60 yuan, and some areas of coke enterprises have been in the deficit. Under the pressure of weak end demand, profits in the middle and downstream sectors have been basically eroded.
From the perspective of coke supply, the price of coke is in a declining trend, and the profit space of tons of coke is narrowing, but the overall inventory level of coke is still low, the production pressure of coking plants is not large for the time being, and the supply of coke is increasing steadily. Research data showed that last week, the capacity utilization rate of national independent coke enterprises was 82.16%, up 0.13 percentage points week on month, down 6.12 percentage points year on year. Coking plant end coke inventory is about 1 million tons, but the coke price is still in a declining trend in the past two weeks, downstream steel procurement enthusiasm has declined, coking plant coke destocking speed is slowing.
In terms of coke demand, the end of the steel mill is in a loss state, but there is no large-scale reduction plan for the main steel production area, and the operation rate of the blast furnace remains stable and rising. Last week data showed that 247 steel mills daily production of hot iron further increased to 2,395,300 tons, weekly increase of 13,500 tons, year-on-year reduction of 41,600 tons, hot iron production has been at a relatively high level, which means that the rigid demand for coke is still good. However, it should also be noted that the current terminal demand is further affected by the rainy season in the south, steel consumption in the short term or difficult to have obvious potential, timber inventory and steel production pressure will be more and more large, coke demand further increase space or limited. In terms of inventory, the recent steel mills basically maintain the pace of on-demand procurement, inventory weekly change is not big.
In general, the regulation and control policies of the National Development and Reform Commission for coal prices are still being improved, and the operation of the coal market is more stable. Recent black metal terminal demand is still depressed, steel, coking coal, coke and other related varieties of price to maintain weak operation, steel mill end profitability is still not optimistic, coke or profit expectations. From the perspective of the futures market, the risk of a high fall in the price of “double coke” has been released. In view of the current strong demand for “double coke”, its price shows signs of stabilization near the semi-annual average line. It is expected that the price of “double coke” may maintain a range of shocks in the short term.
Post time: May-29-2022