① Demand in the coke steel industry chain is weak. Steel companies continue to downgrade to convey the “chill” of the market to the middle and upstream raw materials side, and coke prices have dropped in four rounds. ② Industrial chain profits are concentrated in the upstream coal industry. Some industry insiders expect that throughout the year, coal prices may drop slightly due to weak downstream demand expectations.
Financial Services Association, Feb. 28 (Reporter Zhang Liangde) After the Mid-Autumn Festival, demand for terminals recovered, but industry sentiment was still weaker than in previous years. Steel companies continued to drop to deliver “chill” to the middle and upstream raw materials. Coke prices rose and fell in four rounds, and market sentiment was sensitive under the influence of conflicting expectations of production cuts and slowing demand, and prices fluctuated sharply in the short term.
In the short term, market prices in the industrial chain are still affected by various news, but market supply and demand are still the main influencing factors in the annual trend of coal coke and steel prices. Currently, all profits in the industrial chain are concentrated in the upstream coal industry. A regional business manager at Digital Chain Technology, a coal supply chain company, said that throughout the year, coal prices may show a slight downward trend due to weak downstream demand expectations.
After the Spring Festival, demand in the steel market recovered slowly, while construction sites and production enterprises at the terminals of the steel market were still slow to resume work after the Mid-Autumn Festival, and social stocks of steel were still slowly increasing. Steel and silver e-commerce data shows that for the week ending February 26, the total urban steel inventory in 39 cities and 149 warehouses across the country was 127.492 million tons, an increase of 362,900 tons over the previous week, an increase of 2.93%. A steel trader in the Tangshan area told the Financial Federation reporter: “The market is still relatively quiet.”
Under these circumstances, steel prices in the market are also gradually weakening. A CFA reporter learned from a steel trader in Shijiazhuang, Hebei, that prices for all types of rebar have declined since the Spring Festival, with an average drop of about 30 yuan/ton.
Due to insufficient demand in the steel market, the profit margins of steel companies continue to be compressed, and the steel industry is transferring market pressure to the upstream raw materials side. Since January, the price of coke has gone through three rounds of price reduction, with a cumulative decline of 300-330 yuan/ton, while the price of upstream coking coal has changed little. The price of primary coking coal in an Anze mine has dropped from 1,448 yuan/ton in early January to 1,240 yuan/ton, and the price of refined coal used for some coking has dropped by 100-150 yuan/ton.
The fourth round of cuts came to an end yesterday. Some steel mills in many parts of Hebei reduced the price of coke by 100-110 yuan/ton, and the losses of coking companies may continue to expand. A coke trader in the Xiaoyi region of Shanxi told the Financial Federation: “Currently, coke companies are losing money when they produce coke separately. They all rely on by-products to make up for it. Some coke companies have large losses and temporarily stop production, and market supply and demand are tight.”
Under the dual factors of tight supply and demand in the industry and the pressure of growing losses, some coking companies chose to buck the trend and rise. Some coking companies in Inner Mongolia plan to raise the national standard grade 2 and 3 coke by 100 yuan/ton respectively on the 27th. However, in a situation where the overall pattern of the industrial chain is weak, many industry insiders are not optimistic about the plan for boosting.
Currently, in the coal coking steel industry chain, steel companies and coking companies are already in a state of loss. Iron ore and coking coal companies only have high profits on the raw material side, but under the transmission of middle and downstream pressure, iron ore prices have gradually declined. Currently, the main futures contract price has fallen below 900 yuan/ton. Recently, coking coal prices have fluctuated greatly due to supply and demand news.
Previously, due to rumours about production cuts in some coal companies in Shanxi, the price of coking coal and the stock prices of some listed coal companies fluctuated abnormally. The stock prices of listed coking coal companies such as Jizhong Energy (000937.SZ) and Huaibei Mining (600985.SH) continued to rise, reaching record highs.
According to the contents of the meeting of the Shanxi Provincial Energy Administration on the 25th, in 2024, the energy industry in the province is required to adhere to the six key tasks of adhering to stability, promoting stability through progress, breaking first, and coordinating all tasks, including adhering to stable coal production and supply, and maintaining a high position to ensure energy security. The industry's concerns about the overall reduction in coal production have clearly abated. People from a number of listed coking coal companies in the Shanxi region also told the Financial Federation: “I haven't heard any news about production cuts.”
A number of coking coal industry analysts told the Financial Federation reporter that due to the late resumption of work in coal mines this year, and the impact of the policy on production capacity control and important meetings in March, as well as changes in coking coal's own resource structure and import tariffs, domestic coking coal supply is not expected to increase significantly.