Statistics from China's Coking Industry Association indicate that China's coke production pointed to negative growth in 2008, the first time since 1999.
CCIA predicts that China' demand for coke may further drop in 2009, to 280 million to 290 million tonnes given that the downtrend of coke and coking coal prices may also fall. The coking coal price in the recent long term contract between Japan and Australia declined by 60% compared to last year.
CCIA thinks that this year China's crude steel production may drop and exports of coke will also decline sharply. According to estimates, China's coke exports last year remained at 15 million tonnes while the indirect exports of coke by exports of metallurgical products such as steel products stayed at 60 million to 70 million tonnes.
Mr Huang Jingan chairman of CCIA said net imports of steel and coke will further decline. In the first two months of this year, China's steel exports went down by 52%year-on-year while steel imports reached 1.09 million tonnes a 25% jump compared with January. In the meantime, owing to the wide maintenance move in domestic small and medium-sized coal mines, the coking coal price appears more robust than coke and steel prices. As a result, coke production costs remain high, and the coking product market shrinks on squeezed profit margins.
Crude steel output declined globall and as a result coking coal demand went down. Japan's largest steel maker Nippon Stee along with BHP Billiton and Mitsubishi agreed upon abenchmark price for coking coal for 2009 and settled at USD 128 to 129 per tonne a fall of 57% when compared with last year's USD 300 per tonne.
The sharp decline in global steel production is the main reason for the declining demand for coking coal. Over recent years, the world's annual trade volume of coking coal remained at 230 million tonnes, however China's reliance on overseas coking coal resources is rather weak, and it only imports a small amount for supplement when it needs to. CCIA said that China's coking coal demand will drop some 50 million tonnes this year and the supply-demand relationship will be slack.
Source: Steel Guru
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