China's 'blue sky' environmental policy and high steel output mean that the current global met coke shortage will be slow to rebalance.
The blue sky policy has led to the closure of coke plants older than 10 years, and small batteries have also been shut down. China's January-November met coke output fell by 0.2pc from 2019 to 431,700t, and the country is poised to reduce production further. The Shanxi provincial government put pressure on the cities of Changzhi, Jincheng, Linfen and Jinzhong to remove 4.05mn t of older met coke capacity before 20 December.
China's January-October met coke imports grew six-fold year on year to 2.76mn t, trade data show. The country's met coke exports over January-November dropped to 3.09mn t, down by 46pc on the year. China has been a net importer of met coke since July.
India's January-November met coke imports fell by 18pc year on year to 2.31mn t but hit an almost 2-year high of 348,826t in October, an increase of 55pc year on year and 7pc from the previous month.
While European coke batteries were running at around 80pc of capacity earlier in 2020, coke plants globally are now running at full capacity. Colombia, the world's third-largest met coke exporter, is on track to export a record high 3.5mn t in 2020 compared with 3.15mn t in 2019, Colombian coal federation Fenalcarbon said. Colombian producers exported large amounts of met coke to China earlier in the year, but have since focused on more traditional markets amid recovery in the Brazilian and Mexican steel industries. Similarly, Polish producers are now finding strong demand in Europe after focusing on exports to China earlier in the year. But major Polish producer JSW recently stressed that it views exports of coke to China, which started this year, as its long-term business. European mills are seeking extra coke cargoes amid a recovery in steel production, with Argus' northwestern Europe hot-rolled coil assessment exceeding €700/t for the first time in December. But some mills are having difficulty securing what they need, as coke producers are prioritising buyers whose purchasing remained the most stable during the lockdowns earlier this year. "The first quarter should be the strongest of 2021, but unless something unpredictable happens, demand should remain strong throughout the year," a European coke producer said.
Russian and Polish coke producers have no spot cargoes to offer until March and are reluctant to offer this far in advance, expecting prices to continue rising amid continued strong interest from China.
There are plans for new coking capacity to come on line in Inner Mongolia in the first half of 2021, but producers expect China to continue to be a net importer of met coke for at least two years.
Argus' daily fob North China assessment for 62 CSR metallurgical coke averaged $381.95/t for the month to 31 December, $104/t higher than a year earlier. Chinese mills recently accepted the 11th consecutive round of price hikes for domestic coke.
The current shortage is more demand-led than supply-led, and a fall in global steel production could ease the shortage. Global crude steel production rose by 7pc on the year to 161.9mn t in October. But January-October production was down by 2pc on the year, at 1.51bn t, WorldSteel data show. China's January-October steel production rose by 5.5pc to 873.93mn t, having reached a record pace of production in September.
If China's output continues at a similar level and Brazilian and European steel industries maintain their recovery, met coke will be in short supply in 2021.
