According to the data monitoring of the business society, the coke market in the first half of 2020 is mainly volatile, and it will go up all the way in the second half. By the end of the year, the coke market price in Shanxi was 2242.50 yuan / ton, up 26.93% from 1766.67 yuan / ton at the beginning of the year, and the highest price reached 2242.50 yuan / ton, a new high in recent 10 years.
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As shown in the figure above, the current trend in 2020 is basically the same from the current comparison chart of business community coke. At the beginning of 2020, the commodity market was affected by the public health events, and the coke market could not escape the downward trend. Then, the market trend was divided, with gold and black plates taking the lead, iron ore and coke both increasing by more than 50% annually.
In the first half of 2020, the coke market will fluctuate mainly in a “V” shape, and will go up all the way in the second half.
In the first half of the year, the coke market was mainly downward in the first quarter. Affected by public health events, production, transportation and other links were limited in the first quarter. The operating rate of coke related mining enterprises, coking enterprises and steel plants was generally low. In the case of weak supply and demand, the price was mainly downward. At the beginning of the second quarter, the domestic production, transportation and operation continued to improve, the limited production capacity of the ore terminal recovered, the supply improved, and the coke futures first fell and then rose, further benefiting the mentality of the spot market. The start-up of downstream steel plants has been gradually restored, and the demand for coke is good. Superimposed with the promotion of the capacity reduction plan of each main production area in 2020, the black industrial chain is the main industry on the whole.
It can be seen from the above figure that the coke price has a stable trend of nearly half a month in mid July. After the first round of increase at the end of August, the coke market has been going up all the way. The reasons that support the price of coke rising all the way are as follows:
1. Capacity reduction:
2020 is the closing year of the 13th five year plan. The deadline for most of the de capacity policies in various regions is December 31, 2020, especially in the second half of the year. According to statistics, in 2020, the coke industry will eliminate about 67 million tons of backward production capacity, increase nearly 50 million tons of production capacity, and reduce about 17 million tons of production capacity. There will be about 56 million tons of new production capacity in 2021, and there are still nearly 35 million tons of backward production capacity, which will be gradually shut down in 2021 as planned. It can be said that capacity reduction in 2020 is the hot spot of coke industry throughout the year.
General Office of Shanxi Provincial People’s Government Taiyuan, Linfen, Changzhi and other cities are required to withdraw from coke ovens with the height of 4.3 meters and below according to the approved reduction plan, while Jinzhong, Luliang, Yuncheng, Xinzhou and Yangquan counties (cities and districts) belonging to the “1 + 30″ region strive to withdraw from coke ovens with the height of 4.3 meters and below. Before the heating season in 2020, the whole province will shut down and phase out, reducing the coking capacity by more than 20 million tons. We will continue to promote the relocation and withdrawal of heavy polluting enterprises in urban built-up areas and surrounding areas. By the end of October 2020, 11 Planning Districts of cities divided into districts will withdraw from iron and steel, coking and casting enterprises that do not meet the class A and class B standards of the industrial enterprise classification control of the Ministry of ecological environment, and from iron and steel enterprises that have not completed ultra-low emission transformation (including transportation) within the scope of “1 + 30″. In accordance with the Interim Provisions of Shanxi Province on the elimination of coal washing enterprises, the verification and identification of coal washing enterprises (factories) shall be completed before the end of September 2020. If the identification results belong to the elimination scope, the local county-level government shall ban them in accordance with the law.
Shandong Province issued the implementation plan on accelerating the high-quality development of seven high energy consuming industries, vigorously promoting the capacity reduction, integration and transfer of seven high energy consuming industries, such as steel, aluminum, refining, coking, chemical fertilizer, chlor alkali and tire, and striving to achieve reasonable structure, layout optimization and quality efficiency improvement of high energy consuming industries. The introduction of “one industry, one policy” has helped the orderly and powerful promotion of high-quality development of high energy consuming industries. In the coking industry, Shandong firmly promotes the elimination of backward production capacity, implements inventory management of existing coking projects, and implements the measures of “determining production by coal”, so as to ensure that the coke output of the whole province does not exceed 32 million tons this year.
In 2018, Hebei Province printed and issued the work plan for reducing production capacity of key industries in Hebei Province (2018-2020), making it clear that the steel production capacity of the whole province will be controlled within 200 million tons by the end of 2020.
Hebei provincial government has issued “several policies and measures on promoting the structural adjustment and high-quality development of coking industry”. For coke ovens with a height of 4.3m, relevant enterprises should put forward upgrading or reduction plans before the end of 2019, and all coke ovens with a height of 4.3m in the whole province will be shut down before the end of 2020.
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2. Environmental protection
During the supply side reform of coking industry in 2017-2018, most backward production capacity will be eliminated in the past two years, and the coke output will be stable in 2019. After 2019, as the environmental protection and production restriction policy of coking industry will no longer be implemented across the board, the overall start-up of coking plant will remain high, and the coke output will reach a new high in the same year. In 2019, China’s total coking capacity will be about 640 million tons. Although the environmental protection policy is no longer one size fits all, the frequent environmental inspection still has a certain impact on the local coking enterprises.
3. Transportation
On June 11, 2020, we learned from the Department of ecological environment of Shanxi province that according to the work implementation plan of “public to railway” recently issued by Shanxi Province, all coal and coke out of the province should be transported by railway. However, the transportation in other areas is mainly automobile transportation. Since winter, there are more severe cold weather in 2020. The main coke producing areas in China are all in the colder areas in the north. The severe cold weather has a certain impact on the transportation and handling of coke.
4. Poor performance of new capacity
In 2020, the newly increased production capacity in China will be mainly concentrated in the areas where the previous 4.3m coke ovens were eliminated, such as the main production areas of Shanxi, Hebei and Inner Mongolia. Due to the fact that it will take about 2-3 months for the operation rate of newly increased production capacity to fully improve, the backward production capacity will be eliminated and forced to withdraw at the end of December. The production capacity of newly increased production capacity is limited, resulting in the tight supply of coke market noodles. In 2021, there will still be some new production capacity put into operation. According to the time node, most of the de production capacity will be implemented in the second quarter.
5. Better downstream demand
In 2020, the domestic steel production has been on the high side. Even if the overall domestic construction started in the first quarter is on the low side, the impact of the steel industry is still small. According to the Statistics Bureau, the domestic pig iron output from January to November 2020 was 812.9 million tons, a year-on-year increase of 4.20%. In 2020, the impact of environmental protection policies on steel plants is weaker than in previous years, and the production of emission enterprises after transformation has been relatively stable in autumn and winter this year. Stable high downstream demand provides strong support for the rise of coke price.
As of the end of August, coke has gone through 12 rounds of increase, including 11 and 12 rounds of increase of 100 yuan / ton, and 12 rounds of cumulative increase of 700 yuan / ton. Since entering the fourth quarter, the coke market has been facing the situation of tight supply, mainly concentrated in Shanxi, Henan and other places. In the case of low coke inventory, coke has been in the seller’s market in the fourth quarter. In addition, some steel mills have the demand for goods preparation before the Spring Festival, Hebei and other places are limited in outward transportation and other factors. At the beginning of 2021, the twelfth round of coke price rise will be implemented. From a macro point of view, 2021 is the first year of the 14th five year plan. Although it has made a good start for the coke market, with the gradual production of new production capacity, Coke will eventually enter a state of supply and demand balance. After coke goes out of the seller’s market, the price will eventually return. However, in terms of the current market in the first quarter, the price of coke is likely to reach a new high in the past decade.
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