Regional imbalance of supply and demand may continue to boost the price of coke

The price of j2005, the main contract of coke futures, showed a trend of first restraining and then raising. The coke price has been consolidated around 1850 CNY/ton for nearly three weeks, and the overall trend is following the price fluctuation of finished steel products, but the fluctuation range is larger than that of finished steel products, which is still in the rising channel in the short term. The spot market of coke is optimistic. Under the continuous stimulation of the news of de capacity and the support of strong raw material prices, at present, most of the steel mills in most regions of the country have successively implemented the third round of price increase of 50 CNY/ton for coke. Since the middle of November 2019, the cumulative price increase of three rounds of coke enterprises has been 150 CNY/ton. The profit of coke enterprises continued to rise, and the average profit per ton of coke of 30 independent coking plants in China was about 170 CNY/ton. It is worth noting that in the third round of price increase, Shanxi steel works has a strong resistance to price increase, and some steel works offset the increase by reducing, mainly because the recent steel price continues to fall, the profit of steel works is compressed to a certain extent, the pressure on the raw material end is getting stronger, and the further price increase of Coke will be more difficult.

However, it is also not ruled out that with the continuous promotion of coke de capacity in Shandong Province, there is a regional supply gap for coke, thus supporting the coke price to continue to rise. In terms of coke demand, the blast furnace operation rate of 163 steel plants in China was 65.33%, a slight drop of 0.41% in the ring ratio. Last week, Hebei Province launched a three-day secondary emergency response to heavy pollution weather. In addition, the air pollution in the Fenwei plain is relatively serious in the near future. The iron and steel enterprises in the region have self-discipline production reduction behavior, and the overall blast furnace production reduction proportion reaches 33%. Affected by this, the consumption of coke is reduced by about 20000 tons / day. The stage environmental protection limits the blast furnace operation and the coke consumption slows down. In terms of coke supply, last week, the capacity utilization rate of 100 independent coke enterprises in China was 76.99%, and the weekly to ring ratio continued to decline. Among them, the decline in North and East China was significant, and the intensity of production restriction in Shanxi increased due to weather warning. In addition, last week, Binzhou City, Shandong Province issued a notice on the implementation of special supervision on capacity reduction in coking industry, requiring three enterprises to start to shut down and withdraw from the date of issuing the notice, involving the production capacity of 1.85 million tons; it is clear to shut down and withdraw from the production capacity of 1.2 million tons after the end of heating season 2019-2020; by the end of December 2020, shut down and withdraw from the production capacity of 850000 tons.

By calculation, up to now, Shandong Province has basically confirmed to withdraw 7.85 million tons of coking capacity in 2019, of which 4.9 million tons are within the scope of coke reduction task, which is a step closer to the reduction target. With the continuous promotion of de capacity, coke supply in some regions is tight, and some steel mills purchase from other provinces. In terms of coke inventory, the total coke inventory continued to decline. Last week, it was 9.012 million tons, down 105100 tons on a month on month basis, up 1.2285 million tons on a year-on-year basis. Among them, the inventory of coke enterprises was 466500 tons, down 33500 tons on a month on month basis, up 97900 tons on a year-on-year basis. Coke enterprises started slower and shipped smoothly, and the inventory was at a low level. The inventory of steel plants was 4.7907 million tons, up 65400 tons on a month on month basis, up 184600 tons on a year-on-year basis. The enthusiasm for purchasing and replenishing steel plants was high, especially in East China. The port inventory was 3.753 million tons, down 137000 tons on a month on month basis, the same as that in East China 876000 tons higher than that of the previous year, traders' purchase and bottom reading intention are still cautious, driven by the purchase demand of downstream steel plants, port inventory continues to decline, and the quotation of trade resources slightly increases. From the overall situation, affected by the continuous promotion of production capacity in Shandong Province, the supply side of coke has shown signs of regional imbalance between supply and demand, while the demand for winter storage in the downstream steel plants is acceptable, coupled with the strong coking cost, which promotes the continuous increase of coke price, and it is expected that the coke price will continue to be strong. In the later stage, coke enterprises should pay attention to the operation of downstream steel market and the issuance of environmental protection and production restriction policies, and be alert to the steel mills' behavior of price reduction on the raw material end.