The slowdown in the growth of the global steel industry and the launch of coke oven production in Southeast Asia have led to a decrease in global consumption of metallurgical coke.
The emergence of coke in the spot market, originating from unconventional sources such as Australia and Japan, indicates a slowdown in the steel industry, which traditionally supplied the coke. Australian coke was mainly supplied to its regular customers in Europe, while Japanese coke was mainly consumed domestically.
Meanwhile, the launch of more blast furnaces and coke ovens in Southeast Asia and India has reduced demand for coke, especially for coke of Chinese origin.
China, a traditional coke exporter to the spot market, has sharply reduced its coke exports in the past two to three years, mainly due to strong domestic demand and uncompetitive coke prices in the coke export market. A significant development in 2016 was the introduction of a supply-side reform policy that dictated 276 working days per year, pushing domestic coke prices in China to historically high levels, and prices have remained at these highs ever since. In addition, the strong domestic steel industry economy and the consolidation and closure of small coke ovens have supported and supported the rise in domestic coke prices.
As a result, China's coke exports were no longer competitive with international buyers, and coke exports suffered as well. China exported 4.77 million tons of coke from January to August, down 26.46% from a year ago, according to Chinese customs statistics.
With high domestic coke prices, Chinese mills, especially southern mills, may start looking for arbitrage opportunities. China's southern factories usually produce their own coke or buy domestic coke from Shanxi province. Recently, a 25,000-ton shipment of Japanese coke with 63% -64% CSR, 11% -12% ash was sold to the end user in South China through international intermediaries. An end-user of South China told S&P Global Platts that the possible price was competitive with similar quality Chinese domestic coke, after accounting for 13% duties.
The adoption of non-Chinese coke seems to be alien to many Chinese users, who cite incompatible specifications as the main reason.
However, the Chinese trader did not reject this possibility, saying that the arbitration logic will remain - Chinese factories will buy non-Chinese coke when prices are low enough. “Like coking coal, the Chinese market has become a clearing market,” he said, describing China as a market capable of eliminating excess supply in the spot market.
At the same time, typical demand centers such as India, Malaysia and Vietnam are also seeing an increase in the supply of coke from various countries - for example, from Colombia, Japan and Indonesia - at competitive prices, according to market sources. They added that coke from different origins was subject to different import duties, and some of them may even be imposed by anti-dumping duties, which could affect their ability to pay for coke.
