Chinese coke market stabilizes, import of coke may follow: sources

New York — Following five rounds of accepted price cuts and a round of price rises which were not accepted, the Chinese domestic coke market had briefly stabilized, market participants said.

As domestic coke prices entered a phase of stabilization, market participants said the current climate may encourage users to consider imported coke should the price arbitrage turn favorable.

The five rounds of price revision took place from mid-February to end-March, followed by a proposal to raise prices in early-April which had failed. Market sources said they expected domestic coke prices to remain steady until the end of April.

"Steel mills are not likely to accept the price uptick simply because their margins are not very promising. It is possible for both sides to reassess prices during end-April if downstream steel sales demonstrate a steady recovery," a coke producer said.

The coronavirus pandemic had led to global steelmakers cutting production or temporarily suspending blast furnace operations amid a drastic decline in demand for steel. This meant that coke originally planned for term customers, or for own use, are now searching for demand outlets such as China yet again, a situation last seen in October 2019.

In the first quarter of the year, S&P Global Platts observed coke deals and offers into China included various origins such as South Korea, Japan, Australia, Poland, Egypt and Russia.

"Currently, there are Japanese coke offers priced at similar levels to domestic coke of similar grade," a China coke producer said, adding that offers were around $220/mt CFR China, excluding VAT for Japanese coke with 62% CSR. Imported coke is subjected to a VAT of 13%.

However, offering at similar levels to domestic coke does is not encouraging buying interest at the moment. A coke trader said the arbitrage theory holds, estimating that imported coke has to be at least $10/mt cheaper than domestic coke before it can fuel any interest. "Moreover, imported coke is only of small volumes. Buyers will still consider domestic coke as their priority. However, things could change quickly if more volumes are directed to China in the months to come," he said.

"Chinese coke prices have moved lower recently, so Japanese coke prices have to go down even more to strike a deal. There is no buyer now," a Japanese coke trader said.

Platts assessed domestic coke with 12.5% Ash DDP North China (VAT included) unchanged at Yuan 1,710/mt Thursday, a three-and-a-half-year low -- the equivalent of $250.76/mt FOB China, down 52 cents/mt on the week.