SteelMint Events

Tag: coal prices

  • 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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  • Analysis: Sponge iron producers switch to alternate coal blends amid shrinking margins, resilient import prices

    Analysis: Sponge iron producers switch to alternate coal blends amid shrinking margins, resilient import prices

    Depressed sponge iron demand in the Indian domestic market, coupled with elevated South African coal prices and limited availability of domestic coal for the non-power sector, has compelled Indian DRI producers to experiment with coal from Mozambique, Russia, and even Australia.

    In fact, diversion of high-grade South African coal to Europe have already pushed sponge iron units in India to switch from the most popular RB2 (5500 kcal/kg NAR) grade coal from the country to low-CV RB3 (4800 kcal/kg NAR) since the past few months.

    As 4800 NAR has lower fixed carbon content vis-a-vis 5500 NAR, a higher quantity of the former is required to produce one tonne of DRI.

    Shrinking margins of DRI producers due to high South African coal prices have compelled them to look for alternate blends. Although sponge iron prices have picked up since the sharp decline following the government’s introduction of an export duty on steel, any major fall in coal prices has remained limited due to elevated global prices.

    CoalMint learnt from various mill sources that DRI producers are experimenting with various blends of Russian, Mozambican and Australian coal; any blend that fits the bill should have to be one that helps manufacturers tide over sluggish domestic demand and optimise costs of production that have more than doubled in one year.

    Mozambican coal: Steelmaker JSPL, after some initial experiments, has come up with certain findings pertaining to Mozambican VT 1 grade coal (from Vulcan Energy), which is a suitable alternative to South African RB2. About 0.8 t of this coal will be required to produce 1 tonne of sponge iron.

    However, some sponge iron producers in Chhattisgarh informed that while Mozambican coal seems a suitable alternative for DRI, it is low in volatile matter as compared to South African coal, which fails to make it an exact replacement for the latter. In fact, a blend of the two might give sponge iron units the desired results, sources informed. Very low-VM coal affects sponge metallisation rate.

    Russian coal: High-CV Russian thermal coal that is making its way to India at quite cheaper rates has also attracted the attention of sponge iron manufacturers. Although not used widely, experiments by a few indicate that it has South African RB1 grade coal qualities and its good FC and low sulphur content would make it an ideal choice for sponge producers. However, users are not very sure of the exact results and are of the opinion that a blend of South African and Russian coals could give desired outcomes.

    Australian coal: Interestingly, Australian thermal coal, not usually preferred by sponge iron plants because of its very high VM, is now being experimented with by few sponge iron units in south India as they are completely import-dependent.

    While Australian thermal coal is not coming into India in huge volumes since the past few months, a reputed importer, having its own mine in Australia, is heard to be bringing 4400-4600 NAR grade coal with low VM and FC, which is being used in a ratio of 70:30 (5500 NAR S. African: 4600 NAR Australian) for one tonne of sponge iron.

    Concerns persist

    While various blends are a ray of hope for the sponge iron sector, market participants have also highlighted a key concern that these blends make sense against the backdrop of sluggish demand in which plants do not have to function at full capacity and lower yield is expected.

    However, it would be interesting to see if any of these coals or blends can give higher yields during a period of buoyant demand. If successful, this could be a game changer for the sector as better realisations coupled with lower cost of production would help producers improve margins in the long run.