SMM February 25 News:
Spot supply remained ample, while demand recovery was relatively slow. The tenth round of coke price cuts is expected to materialize, and no new significant favorable macro factors have emerged to boost the market. As a result, coking coal and coke prices declined for two consecutive trading days. As of the close of the daytime session on February 25, coking coal fell by 2.47% to 1,085 yuan/mt, and coke dropped by 2.25% to 1,672 yuan/mt. Fundamentals side: With most coal mines resuming normal production, coking coal supply remained at a high level. Total coal arrivals at ports increased MoM, and the ample supply exerted pressure on coking coal prices. Most coke enterprises maintained profits around the break-even point, with minimal impact on production. Operating rates at coke enterprises remained high, but sales pressure was significant, leading to noticeable inventory buildup at some enterprises. The oversupply of coke continued to weigh on coke prices.
Quasi-Grade I Metallurgical Coke (Dry Quenching) Fell 23.68% Over 4 Months
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Spot price: On February 25, in the coking coal market, low-sulfur primary coking coal in Linfen was quoted at 1,360 yuan/mt, while in Tangshan, it was quoted at 1,390 yuan/mt. In the coke market, the nationwide average price of Grade I Metallurgical Coke (Dry Quenching) was 1,735 yuan/mt, Quasi-Grade I Metallurgical Coke (Dry Quenching) was 1,595 yuan/mt, Grade I Metallurgical Coke (Wet Quenching) was 1,390 yuan/mt, and Quasi-Grade I Metallurgical Coke (Wet Quenching) was 1,300 yuan/mt.
From the historical price trend of the nationwide average price of Quasi-Grade I Metallurgical Coke (Dry Quenching): its average price has dropped by 495 yuan/mt, or 23.68%, over the past 4 months from the previous high of 2,090 yuan/mt on October 22, 2024.
SMM Total Coal Arrivals at Ports Increased MoM
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From port-specific data on coal to steel: SMM total coal arrivals at ports reached 8.076 million mt, up 15% MoM. Among them, Guangzhou Port accounted for 967,000 mt, representing 12% of total arrivals, up 74% MoM.
Outlook
Last week, coke inventories at coke enterprises accumulated again, and steel mill coke inventories also saw a slight increase. Most coke enterprises maintained profits around the break-even point, with production conditions barely stable. However, due to high inventories and sluggish sales, some coke enterprises may slightly cut production. Downstream end-use demand recovery was slow and below expectations, with limited pig iron output growth. Steel mills primarily purchased as needed, further suppressing coke prices. Coking coal supply remained high as coal mines resumed normal production, and coking coal inventories were at elevated levels, with ample supply putting pressure on prices. Coke enterprises' coking coal inventories continued to decline, reflecting weaker downstream restocking demand. Coke inventories at ports increased, and market sentiment remained cautious.
Coke prices are expected to remain under pressure, with a high likelihood of a tenth round of price cuts. The macroeconomic environment and market conditions are unlikely to improve significantly in the short term, and the supply-demand imbalance in the coke market may persist. Although some coke enterprises may slightly reduce production due to high inventories, overall supply will remain sufficient. Steel mill end-use market demand recovery is slow, and with coke inventories at safe levels, procurement enthusiasm is low. Under the premise of ample supply, coke spot prices are likely to continue fluctuating downward.
Institutional Comments
Southwest Futures Research Report pointed out: From an industry logic perspective, coal mines in major production areas have gradually resumed production, leading to an MoM increase in coking coal supply. Import coal clearance volumes have also gradually recovered. Recently, downstream procurement volumes have picked up, and low-priced resources in production areas have seen improved sales, with sporadic price increases for certain coal types. In the coke market, the ninth consecutive round of spot price cuts has already been implemented. Recently, due to some steel mills replenishing raw material inventories, traders' purchasing enthusiasm has also increased, improving coke enterprises' sales and reducing inventory pressure. Additionally, with the continuous decline in spot prices, coke enterprises' profits have pulled back, leading to reduced operating enthusiasm. Overall, the supply-demand pattern for coking coal and coke has marginally improved, but the overall weak trend remains unchanged. From a technical perspective, coking coal and coke futures faced resistance during rebounds. It should be noted that unexpected factors could significantly impact coking coal and coke prices. Investors are advised to manage positions carefully when participating in coking coal and coke futures. Strategically, investors may adopt a bearish approach but should avoid chasing lows at current levels and consider shorting opportunities during rebounds, with attention to position management.
Zhongcai Futures Research Report stated: Supply side: Coal mines have fully resumed production, with increased coking coal output from mines and seasonal growth in Mongolian coal imports. Coking coal supply remains ample. Coke production, however, has been constrained by multiple rounds of price cuts imposed by steel mills, which have eroded profits, forcing some production cuts, though total output remains high. Demand side: Steel mills' pig iron production recovery has been delayed, maintaining a weak state. Inventory side: Steel mills continue to adopt low-inventory strategies, prioritizing the consumption of existing inventories. Steel mill raw material inventories remain in a destocking phase, while coke inventories at coke enterprises continue to build up due to low steel mill restocking willingness. Overall, while downstream finished steel transactions have improved, triggering price increases for furnace charges, the decline in pig iron production signals weak demand, indicating that the current supply-demand mismatch in fundamentals has not been resolved. Downward pressure persists, and with the expectation of a tenth round of price cuts by steel mills, the outlook remains for fluctuating downward trends unless coal mine production cuts or pig iron production increases occur.
