Chinese coke makers, including those affiliated to steel mills and independent coke plants, seem to be still seeking chances to hoard on some cost-effective metallurgical coal cargoes ahead of the country’s Lunar New Year holiday over February 10-17 that may present logistic challenges, Mysteel Global notes.
Steel mills and coke firms usually replenish the feed coal in larger quantities for their winter consumption in a concentrated manner. But this year, their restocking moves have been relenting so far and many want to buy coking coal at lower prices, mainly because of their soured profit margins lately, some sources share.
For example, the profitability ratio of the 247 Chinese steel mills that Mysteel monitors nationwide decreased to 33.77% as of December 21, lower by a notable 5.62 percentage points from a month ago and compared with 64.94% recorded in early August this year.
Mysteel’s other survey showed that steel mills in Tangshan city, the top steelmaking hub in North China’s Hebei province, still suffered an average loss of Yuan 254/tonne ($35.6/t) on selling steel as of December 27.
Though domestic steel mills and coke makers, main downstream buyers of coking coal, have kicked off building up their stocks of the feed coal from mid-November this year to prepare for consumption in the festive month of February, their restocking pace remained relatively slow due to their sustained low-inventory approach as well as the financial straits they faced, Mysteel Global has found.
By December 21, coking coal stocks at the 247 Chinese steel mills under Mysteel’s monitoring reached 8.12 million tonnes, still lower by a substantial 28% from the average level on the corresponding day over 2018-2021 and equivalent to 13.12 days of their consumption.
Besides, their stocks of the feed coal shed by 1.1% on week by the same day, mainly impacted by closure of multiple roads and highways connecting with main coal mining cities in North China’s Shanxi province due to heavy snows during the week.
But compared with a record low seen last winter, the met coal inventory of 8.12 million tonnes at the 247 mills by December 21 this year was slightly higher by 2.4%, largely associated with their higher output of hot metal this year despite an overall falling trend since November, Mysteel Global noted.
In general, these sampled mills have built a total of 740,000 tonnes of coking coal stocks since November this year, dwarfed by an increase of around 851,000 tonnes of stocks logged in the corresponding period in 2021, Mysteel’s monitoring data showed.
In fact, domestic steel mills have maintained lower feed coal stocks than previous years throughout this year, evidenced by a 10.9% on-year drop in average coking coal stocks at the 247 steel mills over January 1-December 21, according to Mysteel’s data.
In addition to their poor profit situation, China’s continued efforts to secure steady coal supplies this year have also relaxed their eagerness to store the feed coal, Mysteel Global noted.
Significantly, Chinese authorities’ relatively lenient approach to coal mine accidents this year has enabled halted coal mines to resume production promptly after passing safety checks. This has greatly dispelled concerns over coking coal supply among domestic end-users, especially when China’s Spring Festival holiday draws near and safety checks tend to strengthen.
For coke makers, coking coal stocks held by the 230 independent coke firms under Mysteel’s tracking have climbed by 1.36 million tonnes from early November to reach 9.16 million tonnes as of December 21, representing relatively quick buildups from their low levels previously.
“The recent retreats in coking coal prices have helped coke plants take a breather from deep losses, with improved profit margins encouraging their operations and lifting buys of the feed coal,” a market watcher revealed.
However, China’s wavering ferrous market could force steel mills to table a new round of coke price cuts in the short run, which could squeeze coke makers’ margins and stall their winter restocking of coking coal as well, a Shanghai-based analyst predicted.