November 2-6th, the main contract price of coke futures J2101 rose strongly. As of the close of the market last Friday (November 6), the price of coke had exceeded 2,400 yuan/ton, an increase of 10.44% that week. In terms of spot, last week, the price of coke production area went smoothly for the sixth round of 50 yuan/ton price increase. The pace of this round of price increases is still fast, indicating to a certain extent that downstream steel mills have better demand for blast furnaces, and the increase in coke prices is still within the acceptable range of steel mills. In the near future, the reduction in supply caused by the policy of reducing production capacity in Shanxi Province will gradually appear, the tight supply and demand of coke will intensify, and the market will continue to be bullish.

Since August, the spot price of coke has risen by 300 yuan/ton, and the profitability of coking enterprises has continued to expand. Last week, data showed that the average ton coke profit of 30 independent coke companies across the country reached 480.88 yuan, an increase of 42.52 yuan month-on-month and an increase of 434.1 yuan year-on-year; from a regional perspective, Shanxi Province, Shandong Province, Hebei Province, and Jiangsu Province average ton coke profitability Has exceeded 500 yuan.

From a fundamental point of view, the tight supply and demand of coke has further intensified, and the trend of destocking has not yet ended.

On the supply side, last week, the capacity utilization rate of 100 coking companies nationwide was 82.80%, a slight decrease of 0.19 percentage points from the previous month and a year-on-year increase of 6.06 percentage points. At present, coking enterprises are profitable, and their production enthusiasm is unabated. Most of the coking enterprises in various regions are in full capacity production, and the capacity utilization rate fluctuates slightly at high levels. Among them, the capacity utilization rate in North China has dropped rapidly by more than 3 percentage points in the past two weeks, mainly due to the centralized shutdown and withdrawal of the production capacity of Shanxi Coking at the end of October.

Regarding the overcapacity reduction policy, in October, Shanxi Province has intensively withdrawn from a batch of 4.3-meter coke ovens in production. It is understood that up to now, nearly 14 million tons of coking capacity has been withdrawn, and some companies that have been shut down after a delay are also actively promoting. It is expected that some companies will continue to shut down in the middle of this month. Previously, the market was mostly skeptical about the implementation of overcapacity reduction policies by enterprises, but at present, the implementation of the policy is good, exceeding market expectations. This is also the direct reason for the continuous increase in coke prices. In addition, the reduction of coking capacity in Henan Province has also been put on the agenda. Last week, Henan Province issued the "Henan Province 2020-2021 Autumn and Winter Air Pollution Comprehensive Management Action Plan". The document clearly requires that by the end of 2020, according to the national and Henan Province backward production capacity elimination standards, the height of the carbonization chamber shall be 4.3 meters and The following 39 coke ovens (with a total production capacity of 12 million tons) have promoted the gradual withdrawal of the production capacity of independent coking companies. According to the survey, 3.4 million tons of production capacity has been shut down and the remaining capacity to be shut down is 8.6 million tons. This year is the final year of the blue sky defense war, and we need to focus on it.

On the demand side, the recent rebound in downstream steel consumption has led to a rebound in the prices of rebar and hot-rolled coils. In addition, the decline in iron ore prices has eased the operating pressure of blast furnaces. Under profitable conditions, it is unlikely that blast furnaces will actively reduce production, and demand for coke remains high. Last week, the average daily molten iron output of 247 steel mills across the country was 2.4560 million tons, which continued to decline slowly, but was still nearly 300,000 tons higher than the same period last year. However, it should be noted that the impact of environmental protection production restrictions in autumn and winter in various regions on blast furnace production will be inevitable, and it is expected that coke demand may continue to slow down.

In terms of inventory, the withdrawal of production capacity on the supply side has aggravated the tight supply of coke, and the demand side is still strong, which makes coke still in the process of destocking. Last week, the total coke inventory was 7.1023 million tons, a month-on-month decrease of 21,400 tons and a year-on-year decrease of 2.557 million tons. In terms of structure, the inventory of coking enterprises has fallen to about 250,000 tons, a decrease of 460,600 tons from the same period last year; the coke inventory of steel plants is close to the level of the same period last year, and there is a certain replenishment expectation in the near future; coke inventory of ports is at a low level in the same period of previous years. It rose slightly last week, ending the eight-week continuous downward trend. On the whole, the current pressure on coke inventory to increase is not great, or it may continue to be maintained at a normal low level. The low inventory status is still conducive to the rise of coke prices.

Overall, the coke market sentiment is relatively optimistic. Low inventory, high profit, and slow decline in supply and demand are the main characteristics of current coke. Before the end of this year, Henan and Hebei provinces still have 10 million tons of capacity reduction expectations. If the policy is implemented strongly, coke prices may still rise. On the disk, in the short term, the price of the coke J2101 contract has risen rapidly, and the risk of continuing to chase higher is increasing. It is recommended that participants can choose an opportunity to place more orders after the coke price pulls back.