Metallurgical coke prices in northern China’s domestic market could be subjected to more price cuts as downstream demand is expected to remain lackluster in the near term. This is due to Tangshan authorities tightening pollution curbs by curtailing steel production, market sources said.
The government of Tangshan, Hebei province, has set up a combined investigative team to further look into iron and steel enterprises that had been found to have violated environmental protection laws and regulations, the city government said in a microblog post on its Weibo account on Saturday.
Industry sources said there was greater scrutiny by the Ministry of Ecology and Environment amid Tangshan’s failure to adhere to emission levels during the Two Sessions held March 4-11.
“Tangshan’s emission level had exceeded the maximum cap during this year’s Two Sessions as many steel mills failed to meet the standard of environmental regulations,. The ministry has ordered mills to strictly follow the guidance to cut production,” a trader based in north China said.
By curtailing steel production, demand for raw materials including metallurgical coke will be adversely affected. “The outlook has turned bearish as steel mills have slowed down procurement activity,” a major coke producer in north China said.
Domestic metallurgical coke prices have fallen Yuan 400/mt since mid-February, a correction anticipated by industry sources after a strong surge in coke prices since August 2020. Market sources said more downside in coke prices -- possibly at least one-two more rounds-- are expected on weaker demand forecast for metallurgical coke.
Industry sources estimated coke producers' profit margins to be around Yuan 600/mt, hot-rolled coil Yuan 500/mt, and rebar Yuan200/mt. The higher profit margin by coke producers will also provide support for further price cuts, sources said.
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