Since the end of April, the market sentiment of coke has changed from relative pessimism to optimism. The main reasons are as follows: first, the operation rate of blast furnace in the downstream steel plant continues to rise, the daily average hot metal output increases significantly, and the demand for coke rigidity is improving; second, after the May Day holiday, the highway fully recovers the toll, the transportation cost rises, driving the coke price to strengthen, and promoting the first round of coke price increase to land Thirdly, coking cost is constantly moving down, which gives coking enterprises space for continuous recovery of profits.

From the perspective of the market, coke 09 contract recently showed a rebound trend. The closing price rebounded from 1638.5 yuan / ton on April 28 to 1776.5 yuan / ton on May 15, an increase of 8.42%. Last Thursday (May 14), Shandong Province reported that the coal control indicators exceeded the standard seriously. By the end of May, Shandong Province will issue relevant policy documents on coal production, and strictly control coking production through coal indicators, so coke enterprises may limit production to a certain extent. According to the investigation of relevant organizations, since the second half of 2019, the coking capacity reduction work in Shandong Province has been promoted orderly. Up to now, the coking enterprises in Shandong Province have withdrawn the coking capacity of 15.96 million tons (including the capacity of braising furnace of 2.45 million tons), basically completed the task of capacity reduction, which does not exclude the further production restriction in the later stage. Boosted by this news, the futures price rose in response. At the same time, the rising sentiment of coke spot market increased, and the regional scope of the second round of price increase of 50 yuan / ton gradually expanded.

In the near future, coke has achieved the first round of price increase. Thanks to the continuous decline of coking cost, coke enterprises' profits have been continuously repaired. Relevant data show that last week (may 11-15), the national average ton coke profit picked up to 92.44 yuan / ton. The stimulation of profit and the current better demand lead to the increase of coke enterprises' willingness to raise production. The capacity utilization rate of 100 independent coke enterprises in China rose to 80.48%, close to the level of the same period last year, and the overall capacity utilization rate is at a high level.

In addition, near the NPC and CPPCC, some regions have introduced some policies on environmental protection and production restriction. Previously, Xiaoyi City, Shanxi Province, required the city's coking enterprises to carry out 48 hours of braising, limiting production by 50%, until the end of May. It is estimated that if the requirements are strictly implemented to the end of May, the total affected output will be about 173 thousand tons, which will boost the local coke price to a certain extent, but the impact on the overall supply of coke is relatively limited.

From the demand side, the demand for coke is considerable. Last week, the average daily output of molten iron of 247 steel plants in China reached 2.3941 million tons, a new high since 2018; the speed of finished steel destocking was fast, the apparent demand of screw steel remained at a historical high level, the profit of long process steel plants was about 300 yuan / ton, the willingness to start blast furnace remained unchanged, forming a certain support for coke demand.

On the whole, in the short term, coke is in a situation of both supply and demand, the demand side continues to be good, the relationship between supply and demand gradually shows a tight balance, and the total coke inventory also continues to decline. In the future, if Shandong Province introduces the relevant policy of coal production, and the coke enterprises can strictly implement it, the regional supply and demand mismatch may occur again in Shandong Province, which may promote the coke price to further rise. However, in the later stage, we still need to pay attention to the influence of coking cost reduction on coking price, and continue to pay attention to policy changes and coal and steel market operation in Shandong Province.