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The seaborne metallurgical coke market has emerged as the top performing dry bulk commodity in 2016 to date, with prices doubling due to a scarcity of domestic Chinese material.

Platts assessed 64/62% CSR and 12.5% ash coke prices up $3/mt day on day at $224/mt FOB North China Wednesday, the highest seen since February 27, 2014 and compared with $111/mt FOB North China on January 4 this year.

Other strong-performing dry bulk commodities have paled in comparison.

Iron ore, another major steel-making raw material has jumped 41% this year to be assessed at $60/dmt Tuesday.

In energy markets, front-month ICE Brent futures are up 30% this year -- having recovered from multi-year lows mid-January, while Platts Thermal Coal FOB Newcastle 6300 kcal/kg GAR 7-45 Day index is 38% higher year-to-date.

"Coke prices are soaring because we do not have much left to sell and cannot increase output by very much because coking coal supply is very tight," a north China coke maker said.

Prolonged losses have led to output cuts in Tangshan -- China's major coke producing region -- and prevented coke makers raising inventory levels.

Tangshan Jiahua Coal Chemicals, one of the largest suppliers in the region with 3.3 million mt of annual output, had hot idled the last two of its top-charged six coke ovens due to cash flow problems.

With Chinese steel mills ramping up blast furnace efficiency to almost nameplate capacity this year, coke suppliers were unable to satisfy heightened demand due to limited stocks.

Two coke suppliers said they were sitting on less than three days' worth of inventory and were shifting coke out of their plant on a daily basis.

Platts-assessed coke 12.5% ash delivered to Tangshan mills has risen about 70% this year to Yuan 1,290/mt ($193/mt) DDP North China on August 25.

A large Chinese coke-maker, the price leader for the north China region, raised prices by Yuan 70/mt Monday.

That meant seaborne material was trading at a $13.36/mt premium to Chinese coke, after accounting for credit, processing, and port port charges as well as exchange rate.

"The forward time risk is significant because the market is going up sharply and we are seeing defaults happening every week," one Beijing trader said, adding he was willing only to offer export coke $15-$20/mt higher than domestic material.

Another development in the Chinese coke market this year was that sales have been on a cash basis, rather than six months' credit, as coke makers wanted to ramp up production as quickly as possible to capitalize on the recent price rally and, therefore, preferred cash payments.

RALLY MIGHT HAVE LEGS

Meanwhile, higher Chinese coke prices have also pushed up prices in other markets, with Indian coke-makers the biggest beneficiaries. 64/62% Indian coke was sold in consistent quantities at 14,500-15,000 rupees ($216-$224/mt) this week.

One Indian coke-maker said he expected seaborne coke prices to keep edging higher as long as the current coking coal price rally persisted.

"Steel margins in India are negative at these raw material prices," an Indian steel mills said. "Either the international steel prices has to go up or coke prices have to go down otherwise steel mills will have to reduce production...One small mistake in [coke purchasing] is sufficient to kill off a small steel mill completely."

Chinese coke makers were also prepared for another round of price rises this month with higher raw materials prices expected, sources said.

Seaborne supply was also constricted with Russian and Colombian coke sources remaining unstable, according to market participants.

Another trading source also said there was not enough Colombian coke to go around as end-users who typically bought Chinese coke had started to source alternatives.

"Some buyers were holding out and thought they could find an alternative," the trading source said. "At these price levels, we heard Colombian material is sold out which explains why there is much more interests from the Americas [including US, Brazil and Argentina]."

A Russian coke producer indicated it was not eying short-term export opportunities to the Asian market as domestic and CIS trades were strong. Export volumes from the producer to the seaborne Asia market have shrunk significantly in 2016 to around 2-5%.