Coke Market Got off to A Bad Start after 2023 Chinese New Year, Eyeing Demand Recovery
Coke prices started the first trading day after the week-long CNY holiday on a weak footing. As of CST 13:58 February, coke prices fell by 3.47% to 2,780 yuan/mt, and coking coal prices lost 4.22% to 1,783 yuan/mt. So far, coke and coking coal prices have lost 6.7% and 8.5% respectively in three days.
After the CNY holiday, many local governments issued policies and guidelines to promote economic growth, and the real estate market has continued to benefit, fuelling strong market optimism. However, alarmingly high inventories of steel mills and lagging recovery of end demand weighed on coke market.
The market is now betting on a third round of coke price cut.
On the supply side, SMM survey showed that only a few coking companies reduced production during the CNY holiday, which had little impact on the overall supply. According to SMM data, as of January 27, the capacity utilisation rate of coke ovens was 77.2%, basically flat from pre-CNY level.
As of February 1, the operating rate of steel mills’ blast furnaces was 91.52%, an increase of 0.44 percentage point from pre-CNY level. And SMM believes that the output of pig iron will rebound in February, which will stimulate the demand for coke.
The current high finished product inventory of steel mills and uncertainty over end demand recovery are now the focus of market attention.
Coke inventory in Shanxi rose 20% amid poor demand.
It is also worth noting that the first batch of Australian coking coal in 2023 is expected to arrive at Zhanjiang Port on February 8. This will pressure coking coal prices, thus weakening the cost support to coke prices.
Overall, the current coke market is dominated by shorts. Coke prices will run weakly in the short term, and the future trend will be mainly subject to how quickly demand picks up.