Market rise and fall, can coke price withstand this round decline?

This week, the steel plant in Dan area began to raise and lower the price of coke by 50 CNY/ton. In addition, the previous two rounds of raising and lowering, the current coke market has been raised and lowered by 3 rounds, totaling 150 CNY/ton. The market sentiment of coke is pessimistic, and the delivery of coking enterprises is facing great difficulties. After the coke price touches the production cost line, the market is more concerned about whether this round of raising and lowering can be effectively implemented. According to the data, the inventory of national coking enterprises will keep increasing in 2019. After the national day, the operating rate of the coking plant keeps increasing. In the case of profit, the coking plant's initiative to limit production is weak, leading to the gradual accumulation of the coking plant's inventory. In the case of steel coke game, it is difficult for coking plant to have enough discourse power. From the perspective of trade, the port coke inventory this year is much higher than that of the previous years. Whether in the peak season or the off-season of coke sales, the port always maintains a high coke inventory, which brings great pressure to the market.

In terms of absolute value, the coke port inventory in 2019 is almost twice of that in previous years, which largely leads to the weak running trend of coke price this year. This week, the coke port transaction is relatively difficult. According to the sales situation of producing area, the overall inventory level of coke enterprises is relatively low. Due to the arrival control of downstream steel mills, the inventory of some coke enterprises has increased slightly, and the new order bargaining of coke enterprises is still relatively passive. Steel mills purchase more on demand, traders purchase less enthusiasm, shipping intention is strong, deal is still less. Whether the coke can be raised and lowered successfully this week requires more attention to whether the cost of coking coal has become an effective support. Because the steel plant always keeps a strong willingness to raise and lower when it has profits at present, from the downstream perspective, in the coke steel game, the coking plant unilaterally wants to stop the decline, so the possibility of its realization is small. So only from the cost point of view, if the price of coking coal continues to decline, the coking plant will continue to accept the price reduction. The current coking coal market has been in a weak situation.

On November 11, part of the low sulfur main coke in Taiyuan was reduced by 30 CNY/ton again in the near future, with an accumulative increase of 160 CNY/ton. The price of coking coal in Luliang Liulin, Linfen Anze and other places also decreased by nearly 200 CNY/ton. From the perspective of coking coal supply and demand market, the high social inventory and the continuous weakening downstream demand constitute the market basis for the continuous suppression of coking coal price. Considering the continuous weakening of demand in the future, the market price of coking coal is expected to further decline. Therefore, there is a possibility of cost in this round of coke lifting and lowering. However, the positive factors of the market are gradually emerging in the near future. On November 12, the Ministry of ecology and environmental protection issued the action plan for comprehensive treatment of air pollution in autumn and winter 2019-2020 in Fenwei plain to further promote the adjustment of industrial structure of heavy pollution industry; promote comprehensive treatment of air pollution in industrial furnaces; and improve the level of comprehensive treatment of VOCs. Although the impact of the policy on the coking industry has not been fully reflected, but in the case of frequent severe pollution weather in autumn and winter and extremely low profits of the coking plant, it is not ruled out that the coking plant will stop production and limit production substantially. In this context, coke price is expected to have a big rebound.