SteelMint Events

Category: Blog

  • Chinese coke plants to cut production by 30% to raise prices

    Chinese coke plants to cut production by 30% to raise prices

    Chinese coke plants are trying to increase prices of their products by cutting down production, as per recent reports. Chinese coke chemical companies plan to cut production by 30% to raise coke prices. This proposal was discussed at a recent meeting held by the market committee of the China Coke Industry Association.

    Higher supplies impact prices  

    According to data from Shanghai Metals Market (SMM), in December 2022 China had increased coke production by 8.3% y-o-y – up to 39 million tonnes (mnt).

    After the Chinese New Year (CNY) holidays, many local governments issued policies to promote economic growth and the real estate market continued to benefit, fuelling market optimism. However, high inventories of finished steel at mills and muted recovery of end demand weighed on the coke market.

    On the supply side, however, surveys showed that only a few coking companies had reduced production during the CNY holidays, which had little impact on overall supply. The capacity utilisation rate of coke ovens was basically flat compared with pre-CNY level.  Therefore, production cut has become necessary to boost prices.

    Plants announce hikes  

    Coke producers will extend coking periods to reduce capacity utilisation, reduce or stop purchases of expensive coking coal to cut production costs. Coke chemical enterprises will give priority to those customers who agree to increase coke prices.

    In particular, Shanxi Coking Coal Group in Shanxi province as well as Inner Mongolia-based Yangdong Coal and Chemical Group announced coke price hikes from 7 March, 2023. Shanxi Coking expects further growth amid increased loading of production capacities in the steel industry.

    Ban on Australian coal lifted 

    Resumption of coking coal exports from Australia in the first week of February has weighed on domestic coal and coke prices. The Chinese government has now lifted the unofficial ban on Australian coal for all companies compared with just four State-owned companies previously.

    Although cargoes have started arriving on Chinese shores, sources informed CoalMint that stiff Australian coal prices will find few takers in China at the moment, especially when supplies from Mongolia and Russia are stable. However, China’s imports of high-energy Newcastle coal could be supportive for thermal coal prices and, in turn, keep met coal prices supported.

    Mongolia shifts to auctions 

    The Mongolian government is moving to an auction system for coal sales that will replace the long-term contracts favoured by Chinese buyers and impose additional transport costs on customers. China has sought to expand its coal trade with Mongolia in recent years, particularly after halting shipments from Australia. However, investments in infrastructure, particularly railway infrastructure, are expected to reduce logistics costs in the coming years.

    The Mongolian government is planning to sell 12 mnt via auctions by July this year. The government intends to use auctions for all its coal sales – including the coking variety for steel mills and thermal coal for power plants – in 2024 and 2025. The full-scale impact of this move by the Mongolian government on China’s coal and coke markets will unfold in the coming time.

    Outlook  

    China’s steel output is set to rise in the coming months, helped by a seasonal upturn in construction activity, although excess steel stocks will limit the ramp-up in production. Notably, the Chinese government has reviewed import duties on coking and thermal coal to support domestic producers. From 1 April, the import duty on coking coal will be 3%, and for thermal coal 6%.

    At the same time, zero import duty on coke will be maintained this year. So, coke imports to China may increase this year amid rising production in Indonesia and other countries of South East Asia.

    2nd Coal Outlook & Trade Summit  

    How will the met coke and coking coal scenario evolve in China in 2023 and beyond? What is the outlook on the anticipated increase in met coke exports by Indonesia on the back of rising capacities in that country? Will exports to China rise significantly? How might this affect domestic prices of met coke in China in 2023 amid constrained crude steel production?

    Find answers to these and other queries at CoalMint’s 2nd Asia Coal Outlook & Trade Summit in Bangkok on April 24-25, 2023, where Mr. Yang Lu, General Manager and Executive Director, China Risun Group, will share his insights.

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  • China may reduce coking coal consumption in steelmaking by 20-25% by 2030

    China may reduce coking coal consumption in steelmaking by 20-25% by 2030

    China, the world’s top steel producer, is seeking to cut down on its consumption of coking coal for steel production in sync with its ‘dual carbon’ goal of peaking emissions by 2030 and attaining carbon neutrality by 2060.

    In line with this objective, the steel industry in China is expected to reduce consumption of coking coal by 20-25% by 2030, reports indicate. It is predicted that the share of predominantly scrap or green DRI-based electric arc furnaces (EAF) in China’s total crude steel production will rise to 22% by 2030 from 12% at present.

    However, the task is huge, considering the fact that the Chinese steel industry is predominantly coal-based. As per CoalMint data, out of 1.01 billion tonnes (bnt) of steel produced in China in 2022, 88% was churned out through the BF-BOF route. This required mammoth consumption of coking coal: in 2022 China’s coking coal production stood at 676 mnt, while another 64 mnt was imported, IEA data reveals.

    Due to the heavy reliance on the coal-based BF-BOF route, a polluting steelmaking pathway, steel production accounts for about 20% of the country’s total annual carbon emissions making it the largest industrial emitter, as per Global Energy Monitor (GEM) data. When emissions from electricity used by the sector are included, the share goes up to 24%. Thus, it is a key target in the government’s efforts to curb carbon emissions and improve air quality.

    Why might coking coal consumption fall?

    1. Steel production to drop: It is expected that steel production in China has almost plateaued. Many experts reckon that the 1.059 bnt of crude steel production in 2020 represented the peak. In 2022, crude steel production fell by 2% y-o-y. It is projected that crude steel production will drop to around 850 mnt by 2030.

    The capacity swap scheme is the most important policy intervention in the Chinese steel industry first introduced by the Ministry of Industry and Information Technology (MIIT) in 2014. The 2021 version of the capacity swap scheme revised measures for certain regions, raising swap ratios to 1.5:1 from a previous 1.25:1 in key air pollution control regions.

    The new version was also carefully designed to encourage EAF capacity and non-BF capacity expansions. If new iron ore and steelmaking facilities are environmentally friendly, such as EAFs, Corex, Finex, HIsmelt or hydrogen-based ironmaking plants, capacity can be swapped equally. Thus, coking coal consumption in steelmaking will naturally fall.

    2. Scrap/DRI share in steelmaking to rise: Higher steel scrap usage expectations could eat into coking coal demand. The National Development and Reform Commission (NDRC) sees China’s 2025 steel scrap usage rising to 320 mnt on carbon neutrality goals.
    During the 2021-25 period, Chinese crude steel output could plateau, which would cut molten iron output by 50 mnt and trim 21 mnt of coking coal demand in the period, Baosteel Group’s research arm Hwabao Securities has stated. The scrap ratio in steelmaking is expected to increase to 34% by 2030.

    In 2021, as per GEM data, China approved 39 new EAFs with a total capacity of 28.7 mnt/year through capacity swaps which is more than the sum of 2018-2020. The development of EAF is forecast to play a big role in reducing China’s steel industry carbon emissions.

    3. Hydro gen likely to replace PCI coal: An early use of green hydrogen in the steel industry will be in existing blast furnaces to replace pulverised coal injection (PCI) coal. Experts contend that reducing carbon emissions from blast furnaces will involve the use of higher-grade iron ore and the replacement of PCI coal with hydrogen.

    Therefore, apart from the use of hydrogen in production of fossil-free DRI which is gaining increasing prominence in China, the move towards higher efficiency in BF-BOF steelmaking will see producers transition from low-grade coking coal (PCI coal) to coke oven gas (COG) first and then hydrogen. Therefore, overall coking coal demand is likely to drop.

    Outlook

    At this stage of the global energy transition, high coal prices – as well as energy security concerns – are likely to hasten the transition towards alternative technology, including the replacement of PCI coal with hydrogen. Therefore, the long-term demand scenario for coking coal remains bearish, although it will take another decade or so before the final signs of decline become visible.

    2nd Asia Coal Outlook & Trade Summit

    Want to follow the discussion on how Chinese steelmakers are expected to cut coking coal consumption? Be a part of the discussion on technological breakthroughs in the Chinese steel industry at CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held at the Grand Hyatt Erawan in Bangkok, Thailand on 24-25 April, 2023

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  • Global coking coal trade volumes rise nearly 8% in 2022. Know why?

    Global coking coal trade volumes rise nearly 8% in 2022. Know why?

    Despite the slump in world crude steel production in 2022, global seaborne trade in coking coal remained strong with imports of Coking coal and PCI increasing by 8% y-o-y to around 319 million tonnes (mnt) from 295 mnt in 2021, as per provisional data maintained with CoalMint.

    Leading importers

    India was the leading coking coal importer at 69 mnt in 2022, accounting for 22% of total global imports. India’s imports were almost stable y-o-y compared to 2021 China was the second-largest importer at 63 mnt. Imports by China rose 17% y-o-y, although crude steel production fell around 2%. Imports by Japan and South Korea remained largely stable y-o-y at 57 mnt and 22 mnt, respectively. Sentiments remained bearish on a gloomy global steel export outlook amid high inflation, supply chain problems in the auto industry and natural disasters. Europe’s coking coal imports fell by 15% y-o-y due to high energy inflation affecting steel production and demand following the outbreak of the Russia-Ukraine conflict. After Europe imposed a complete ban on Russian coal imports from 10 August global trade flows altered. The EU traditionally sourced 55-60% of its coking coal requirement from Russia and Australian and US coking coal made their way into the continent.

    Top exporters

    Australia was the largest coking coal exporter in CY22, although its share in global exports fell by 8% compared to 2021 due to bad weather. The La Nina event in the country led to heavy rains in the mining regions which affected operations, leading to supply disruptions. In addition, strikes by mine workers and unavailability of labour weighed on production. The US and Canada emerged as an alternative to Australian coal due to supply disruptions. Russia emerged as the second largest exporter with 47 mnt, an increase of 48% y-o-y. The war between Russia and Ukraine affected seaborne trade dynamics of coking coal. As more Russian coal found its way into China and India, Japan and South Korea reduced sourcing of Russian coal in response to Western sanctions.

    Why trade volumes increased?

    1. India’s crude steel production increased by around 6% y-o-y to over 124 mnt. Similarly, hot metal production also increased by 4% to 80 mnt from 77 mnt in 2021. For Indian importers of coking coal there was no major change in the demand scenario. Demand did not fluctuate much since the steel export duty fiasco but remained generally steady.

    2. The war with Ukraine took a toll on Russia’s steel production as well as exports. Data show that hot metal production in 2022 decreased by over 7% y-o-y to 50 mnt from 54 mnt in 2021. This left Russian miners with higher volumes for exports. After sanctions were imposed by the European countries on Russia following its invasion of Ukraine, the country started exporting coal at cheaper prices to Asian countries like China and India, resulting in a hike in export volumes. It may be mentioned that India imported 9.7 mnt of Russian coking coal in 2022, up 154% on-year, while China imported 21 mnt, an increase of 90% y-o-y.

    3. Global energy inflation drove steam coal prices to record highs across the globe, while steel production in many parts of the world suffered owing to high inflation and currency volatility. So, thermal coal prices soared way above coking coal prices globally forcing thermal coal users to switch to coking coal in many cases. This, in part, contributed to higher coking coal trade volumes.

    4. Although China’s crude steel production declined 2% 2022, domestic production of coking coal also fell marginally, thereby creating room for exports. Moreover, pandemic restrictions impeded the movement of domestic scrap for steelmaking, impacting EAF steel production. Higher shipments by Russia and Mongolia also account for higher imports by China. Mongolian shipments doubled y-o-y in 2022 as COVID-related restrictions were eased enabling truck movement across the border, while Russian cargoes were available at much cheaper rates since sanctions against Russia came into force in August.

    Outlook

    WSA has predicted steel demand to increase by 1% in 2023 to over 1.8 billion tonnes. Steel markets are expected to normalise in 2023, excluding China. Fitch expects global steel consumption to shrink by 60-65 mnt in 2022, with capacity utilisation dropping from 80% to 77%. China’s targeted reduction of steel production will account for 20-30 mnt of this, with the rest coming from demand destruction outside China. Incremental growth in steel consumption in 2023 is expected in India, Southeast Asia and the US.
    Therefore, coking coal demand will remain stable. Coking coal imports by India from Australia are also expected to remain stable in 2023, with the FTA between the countries leading to duty-free inflow of coal. Prices remained strong after a bumper 2022, driven largely by global energy prices and shortages cause by the Russia-Ukraine war. The other big-ticket item in January was the news that China is set to end its unofficial ban on importing coal from Australia, which is largely positive for global coking coal prices.

    Three central government-backed utilities and China’s top steelmaker would be allowed to resume imports. A recent report in the Australian Financial Review also indicates that Australian coking coal imports might displace lower quality and higher cost Chinese domestic or US coking coal, particularly for Chinese steelmakers in the southern region. Note that China’s proposed import duty on coal leaves Australia and Indonesia unaffected.

    Australia had diversified its coal exports to non-traditional buyers and ramped up supplies to traditional ones in the absence of China from the seaborne market. But now Chinese inquiries are expected to rise which may push prices higher. However, the continuing recovery of supplies from Australia will lead to an eventual correction, even if not significantly.

    Interestingly, Mongolia’s recent move to auction coal through the country’s stock exchange instead of direct sale by producers and traders at the border will directly impact Chinese buyers of Mongolian coking coal. We have to wait to see whether auction sales by Mongolia result in rationalisation of prices. Also, easing coal supplies via road from Mongolia after the withdrawal of pandemic restrictions and new investments in railway infrastructure are expected to reduce logistics costs and, therefore, coal prices.

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  • Russia: Coking coal exports rise nearly 50% in 2022 on higher shipments to China, India

    Russia: Coking coal exports rise nearly 50% in 2022 on higher shipments to China, India

    Russia’s seaborne exports of coking coal and PCI coal are estimated to have increased by a sharp 48% y-o-y to 47 million tonnes (mnt) in 2022 from around 32 mnt in 2021, as per provisional data maintained with CoalMint. Although sanctions on Russia cut off seaborne supplies to traditional importers such as the EU, Japan and South Korea, increased exports to China and India contributed to the growth in export volumes.

    The EU has hitherto been heavily dependent on imports of Russian coal, which accounted for 46.7% of all EU imports of solid fuel last year, according to Eurostat data.

    Leading importers

    Russian PCI and coking coals saw stronger demand in China, and also into India, trading at prices lower than for alternative coals from Australia and North America.

    Data reveal that Russia’s met coal exports to China increased by nearly 100% y-o-y to over 21 mnt in the year gone by. Despite China’s crude steel production falling around 2% y-o-y in 2022 and relatively low domestic coal prices due to extensive COVID-induced lockdowns, imports from Russia surged due to high discounts offered by Russian suppliers post imposition of trade sanctions.

    Russian met coal exports to India edged up even more sharply by over 140% y-o-y to 9.3 mnt. The country’s crude steel production increased by 6% y-o-y to over 124 mnt in 2022 while coking coal imports were stable at around 70 mnt. Cheaper Russian cargoes were lapped up by Indian coal importers amid high global coal prices following the outbreak of the Russia-Ukraine war.

    On the other hand, Russia’s exports to traditional markets such as Japan and South Korea fell by 40% and 59%, respectively amid sanctions.

    Moreover, the ban on the transport of Russian coal was amended in September and allowed for the provision of services like shipping, financing and insurance needed to transfer coal and other products by ship to destinations outside the EU in order to alleviate the energy crisis worldwide. Since then Russia’s seaborne coal exports jumped sharply, with many of the shipments going to Asia.

    Outlook

    Russia’s production of met coal increased by 4.5% to 105 mnt in 2022, as per Rosstat data. However, higher export shipments may not be possible due to logistical bottlenecks. Cancellation of discounts on coal freight levied by the RZD may exert pressure on suppliers to curtail discounts. Also, China’s lifting of an unofficial ban on Australian coal imports, higher shipments by Mongolia and enhancement of domestic production are likely to affect China’s imports of Russian coal.

    However, Russian suppliers looking to ramp up exports to China know that higher discounts are likely to increase the attractiveness of Russian cargoes, even for Indian buyers. Going forward, India’s coking coal demand is likely to increase and – quality considerations apart – if Australian supplies become costlier post China’s re-entry into the Asian seaborne met coal market, Indian buyers may have to fall back on Russia.

    2nd Asia Coal Trade Summit

    Will Russian met coal exports to Asia increase in 2023? How will trade dynamics pan out with the continued sanctions on Russian exports? How is Russia gearing up to consolidate its logistical networks to channel increasing volumes to Asian buyers in the coming years? For in-depth insights on such pressing issues and more, sign in for CoalMint’s 2nd Asia Coal Trade Summit to be held in Bangkok, Thailand on 24-25 April, 2023

  • Indonesia’s coal exports rise 10% in CY22. Will the momentum sustain in CY23?

    Indonesia’s coal exports rise 10% in CY22. Will the momentum sustain in CY23?

    Indonesia’s thermal coal exports increased by 9% y-o-y to 341.3 million tonnes (mnt) in calendar year 2022 (CY22), CoalMint data shows. Exports to India rose by 57% y-o-y. However, shipments to China and Vietnam recorded a decline in 2022.

    Indonesian shipments to India stood at 109.43 mnt in 2022. India faced a sultry summer in the year gone by, compelling the government to mandate power utilities to import 10% of their coal requirements for blending with domestic coal. Of the total volume of Indonesian coal imported by India last year, about 60% was imported during March-July when summer was at its peak.

    India apart, Indonesian coal shipments to South Korea and Japan increased by 30% and 37% y-o-y to 25.84 mnt and 17.65 mnt, respectively.

    In a significant development, Indonesia turned out to be the preferred destination for thermal coal imports by some Asian countries amid altered global trade dynamics. Sanctions on Russian coal imposed by the European countries resulted in increased demand for Australian coal from Europe. This played a crucial role in keeping Australian coal prices elevated. As a result, key buyers of Australian coal such as Japan and South Korea opted for more Indonesian coal.

    High-CV Indonesian 5800 GAR coal prices averaged $170/t FOB in CY22, an increase of 53% y-o-y. In contrast, Australian 5500 NAR coal prices averaged $196/t FOB in CY22, 14% higher than Indonesian thermal coal prices.

    Indonesian coal exports to Vietnam dropped as the country used more of domestic coal and avoided importing coal due to high prices.

    Outlook

    Indonesian thermal coal exports are likely to remain under pressure in the coming months as rising COVID-19 cases in China – a possible fallout of the Lunar New Year celebrations – may impact logistics, industrial activity and power demand. In India, demand from the power, textiles and cement industries may remain subdued due to increasing domestic production. However, the government’s recent mandate to power plants to import 6% of their overall requirements as a safeguard measure for the peak summer season is most likely to drive imports in the short term.

    2nd Asia Coal Outlook & Trade Summit

    Will Indonesian coal imports grow in the short-to mid-term due to cost competitiveness amid changing global trade flows? Or will rising domestic power generation by PLN tilt the policy focus towards conserving more fuel for domestic use? Follow the discussion at CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held in Bangkok, Thailand, on 24-25 April, 2023.