In October, the demand for finished products improved significantly, breaking through the high of 4.4 million tons per week, and the price of black products went up overall. Among them, coke performed particularly well under the stimulus of downstream shortages and high molten iron output. It wasn't until early November that coke futures prices fell from a high level due to high disk premiums. After six rounds of increases, the spot price also began to weaken. Downstream steel mills were more resistant to the seventh round of increases. Whether the market price of coke can continue its previous glory is questionable.

High profits stimulate the start of coking plants

In mid-October, news from Shanxi called for the elimination of more than 20 million tons of coke oven capacity below 4.3 meters before the end of the year. By the end of October, 12.3 million tons of production capacity had been eliminated, and in November, 10.52 million tons were expected to be eliminated. In the later period, localities will successively announce plans for reducing production capacity during the heating season this year, involving 29.73 million tons of coking capacity.

However, in an environment of reduced capacity, the supply of coke has not decreased. In order to meet downstream demand, the operating rate of coke ovens has increased, which has been above 86% since the end of October. As of November 13, the weekly coke output of independent coking plants nationwide was 4.8146 million tons, which was only 0.92% lower than two weeks ago.

Recently, the profit of the coking plant has exceeded 500 yuan/ton, and the production enthusiasm of the coking plant is high. Although the determination to reduce production capacity this year is large, due to the strong demand for downstream molten iron and the profitable production, the coke market is expected to maintain the current high supply state before the end of the year.

The time node of "North Materials Going South" is postponed

In September, under the influence of La Nina, the weather forecast indicated that this year would be the "coldest winter in history". In addition, the stock level of finished products at that time was more than 50% higher than that of the same period last year. The market was very worried about this winter storage. The black sector is generally sluggish. However, in October, the apparent weekly demand for rebar reached 4.4 million tons. In the week of November 13, it broke through 4.64 million tons in one fell swoop, and finished products were destocked at a rate of 1 million tons per week.

In previous years, affected by the winter cooling, it was at the time node of "Northern Woods Going South". This year, winter was delayed. The temperature in the northeast and other places was higher than that of the same period in previous years by more than 10 degrees Celsius. Most of the materials were digested in the north, making Guangzhou and others The land maintains a very low storage level. At the current rate of digestion, it is expected that by the end of November, the stock of finished products will be comparable to the same period last year.

High output of finished materials stimulates demand for coke

As of early November, domestic pig iron production was 24.662 million tons. Although the production of pig iron has declined due to the suspension of the heating season, the output of pig iron has declined, but the rate of decline is still at a high level of more than 24.5 million tons, which is 13.5% higher than the same period last year. This makes the demand for coke good, and the six rounds of increase have landed smoothly. Areas such as Shandong are even out of stock.

In September, under the suppression of high inventories and "cold winter" expectations, the market believed that steel mills would reduce the production of molten iron, which in turn led to a decline in coke demand. At that time, the profit of the steel mill was squeezed by the charge to reach the break-even line, and there was indeed sufficient motivation to reduce production. However, later iron ore prices continued to fall, and steel mills' profit per ton rose to 350 yuan, which weakened the motivation to reduce molten iron production. It can be expected that before the end of the year, the high output of finished products and the high demand for coke will continue.

Signs of accumulation of fuel in steel plants

As of the week of November 13, the total national coke inventory was 7,240,400 tons, the overall level is still low, but it increased by 1.64% from the beginning of the month, and an increase of 120,000 tons during the week. This part of the increase mainly occurred downstream. The inventory of 110 steel mills across the country increased by 12%, and the Rizhao Port Depot, which remained low in the previous period, also increased by 60,000 tons. The coke market showed signs of accumulation, which is also the reason why the disk did not rise but fell after the seventh round of the increase, and the downstream resistance was strong. If subsequent coke inventories continue to rise, disk prices will be under pressure under bearish expectations, and coking profits will also shrink from high levels.

Previously, the price of coke broke through 2500 yuan/ton under the blessing of funds, and then became calm and returned to the 2400 yuan/ton mark that was almost equal to the spot market. This indicates that the market has returned from bullish sentiment to the fundamentals of the industry. If there is no greater news to stimulate the market outlook, it is difficult for the disk to strengthen further, and 2500 yuan/ton will become a pressure level. In terms of fundamentals, the downstream demand of the black series has been good this year, giving the market strong support. However, the recent signs of coke accumulation have shown that it may become the weakest variety in the snail coke mine. Operationally, the trading idea of interval oscillation can be maintained. However, if subsequent coke capacity reduction work continues to be expanded and implemented, coke prices will still have an upward momentum.