Global Metallurgical Coke Demand Slows as Steel Demand Wanes, Oven Capacities Rise
October 7, 2019 - A slowdown in the global steel industry and the start up of coke oven capacities in Southeast Asia has resulted in the decline in the global consumption of metallurgical coke, market sources said.
The emergence of coke in the spot market, originating from non-traditional sources like Australia and Japan, highlights the slowdown in the steel industries which these coke had traditionally supplied to. Australia's coke was mostly supplied to its long-term customers in Europe, while Japanese coke was largely consumed domestically.
Meanwhile, the firing up of more blast furnaces and coke ovens in Southeast Asia and India has resulted in lesser demand for coke, particularly coke of Chinese origin.
China, a traditional exporter of coke to the spot market, has reduced its coke exports sharply in the last two-three years, largely due to strong domestic demand and uncompetitive coke prices in the coke export market. A significant development in 2016 saw the introduction of the supply side reform policy, which dictated that the number of work days in a year be 276, had driven Chinese domestic coke prices to historically high levels and prices have remained perched at these highs since then. In addition, a strong domestic steel economy, as well as the consolidation and closure of small coke ovens have exerted and supported the upward push in domestic coke prices.
As a result, China's coke exports were no longer competitive for international buyers and its coke exports took a hit as well. China exported 4.77 million mt of coke from January to August, down 26.46% from a year ago, data from China customs statistics showed.
With strong domestic coke prices, Chinese mills, particularly the Southern mills may begin seeking arbitrage opportunities. China's Southern mills typically produce their own coke, and buy domestic coke of Shanxi origin. Recently, a 25,000 mt cargo of Japanese coke with 63%-64% CSR, 11%-12% Ash was sold to a Southern China end-user, via an international middlemen. The Southern China end-user told S&P Global Platts that the eventual price was competitive to Chinese domestic coke of similar quality, after accounting for 13% duties.
The acceptance of non-Chinese coke appears to be alien to many Chinese users, who cite incompatible specifications as the main reason.
However, a Chinese trader did not reject the possibility, saying that the arbitrage logic will hold -- Chinese mills will buy non-Chinese coke when prices are sufficiently low. "Like coking coal, the Chinese market has become the clearing market," he said, referring to China as a market with the ability to clear excess supply in the spot market.
Meanwhile, typical demand centers like India, Malaysia and Vietnam have also seen more supplies of coke from different origins -- such as from Colombia, Japan and Indonesia to name a few -- being offered at competitive prices, market sources said. They added that coke of different origins were subjected to varying import duties, and some may even be slapped with anti-dumping duties, which may affect their ability to pay for the coke.