SunSirs: China Coking Coal Price Fell and Rose in 2023, or May Fluctuate in 2024

In 2023, the price of coking coal showed a "V" trend, with a market price of 2551.67 RMB/ton at the beginning of the year and 2,450 RMB/ton at the end of the year, a price drop of 3.98%. The lowest point of the year was around 1,687.5 RMB/ton on June 17th, and the highest point of the year was 2,551.67 RMB/ton in early January.

In 2023, the price of coking coal experienced an upward trend of 7 months and a downward trend of 5 months. The highest increase was 15.49% in September, and the highest decrease was 18.52% in May.

Note: The K-bar chart of commodity prices uses the concept of price trend candlestick to reflect weekly or monthly price fluctuations in the form of a bar chart. Investors can buy and sell based on the changes in the K-bar chart. Red indicates an increase; Green indicates a decline; The height of the K-bar represents the range of fluctuations.

Let's take a look at the specific trend. Prices have been consistently low from January to mid February, rising from mid February to early March, falling from mid March to the end of May, consolidating from May to the end of June, rising from the end of June to mid August, falling from mid August to early September, and overall rising from the end of September to the end of the year.

From January to mid February, prices continued to be low. Just after the Spring Festival, demand has not yet recovered. Recently, downstream coke mills have mainly purchased coke on demand. In January 2023, the coke market experienced two rounds of price reductions, and coke's enthusiasm for purchasing coke coal was average. From mid February to early March, prices rose. At the beginning of the month, the market trading situation was average, and the supply of coking coal increased. As the end of the month approached, the market was boosted by tight supply, and the main players were operating steadily and positively. From mid March to the end of May, prices fell, and coal mines maintained normal production and sales. The situation improved compared to the previous period, with some enterprises reducing inventory, but downstream enterprises mostly maintained low inventory. In May, the downstream coke market experienced a total of 5 rounds of price increases and decreases, with a cumulative decrease of 400 RMB/ton. From May to the end of June, prices stabilized and coal mines continued to operate normally. The overall inventory pressure was not high, and the overall inventory remained low. The downstream coke market is approaching the end of the month, boosted by the upward trend in steel prices, and the market has started its first round of price hikes. However, the coke steel game mentality is heavy, and the first round of price hikes has not yet been implemented. From the end of June to mid August, prices rose and coal mines continued to operate normally. Recently, coal prices have risen, and the trading atmosphere is still good. The overall supply of coking coal is tight. The price of coke has increased, and it is expected that three rounds of price increases will be fully implemented. From mid August to early September, prices fell, coking coal prices were weak, and coking coal production slightly increased. In terms of coke, the inventory of enterprises is low. With the implementation of the crude steel control policy, there has been a slight slowdown in coke procurement recently. Downstream mentality has become more cautious, and the procurement pace has slowed down. From the end of September to the end of the year, the overall upward supply in the mining area was relatively low. Due to comprehensive factors such as safety and environmental protection, the recent production has slightly declined, and the overall supply is tight. Downstream coke has been operating strongly this month, with an optimistic attitude from downstream, which provides favorable support for coking coal prices.

The overall price of coking coal fell first and then rose. How will the price develop in 2024.

In terms of supply: From 2021 to 2023, under the influence of the policy of increasing production and ensuring supply, the production of raw coal has accelerated. With the continuous promotion of the policy of increasing production and ensuring supply, the industrial raw coal production in 2023 reached 4.66 billion tons, a year-on-year increase of 2.9%. Imported coal reached 470 million tons, a year-on-year increase of 61.8%. China's coal production has reached a new high for the third consecutive year (4.13 billion tons of raw coal production in 2021, a year-on-year increase of 5.7%; 4.56 billion tons of raw coal production in 2022, a year-on-year increase of 10.5%).

Although the raw coal production in 2023 has reached a new high for three consecutive years, the overall increment of coking coal used for metallurgy is slightly lower, and the growth rate is also slower than other coal types. Due to factors such as a long construction period, strict approval, and safety supervision, the actual new production capacity of newly built coal mines in 24 years will be relatively limited, and the domestic coking coal production will still be relatively low. Affected by frequent accidents in mining areas in Shanxi Province in the second half of 2023, the current national safety supervision is still relatively strong, which will also affect the supply of coking coal. It is expected that coking coal supply will remain tight in 2024.

In terms of downstream demand: According to the latest data from the National Bureau of Statistics, the coke production in 2023 was 49.2.6 million tons, a year-on-year increase of 3.6%. Currently, the overall supply of coke is relatively stable, and it is expected that the supply of coke will also remain stable in the next 24 years without significant external factors. Mainly because steel mills have been actively increasing production in the past 23 years, the demand for coke has been relatively stable. Therefore, the current production situation of coke mainly depends on the demand of downstream steel mills, and the actual production of coke is closely related to the operation of blast furnaces in steel mills.

In terms of imports and exports: Data shows that from January to December 2023, China imported a total of 101.927 million tons of coking coal, an increase of about 38 million tons compared to 2022, with a relatively large increase. The domestic coking coal imports are mainly Mongolian coal and Russian coal, with imports from Mongolia, Russia, Canada, the United States, Indonesia, and Australia accounting for 98.7% of the total imports. Importing 47.4029 million tons of coking coal from Mongolia, an increase of 25.8002 million tons year-on-year, an increase of 119%, accounting for 52.3% of the total import volume.

Import tariff restoration: Among the main coking coal importing countries in China, Australia and Indonesia have a treaty tax rate of zero, while Mongolia, Russia, Canada, and the United States will implement a most favored nation tax rate of 3%. Therefore, starting from January 1, 2024, the cost of imported coking coal from these countries will increase by 3%. According to market quotations, most of the costs are now borne by exporting coal mines or traders. Although the restoration of import tariffs on coking coal has little impact on the current coking coal market, in the long run, the cost of import tariffs will gradually shift to downstream coking plants and steel mills in the seller's market.

Analysts from SunSirs believe that the increment of domestic coking coal production is limited and cannot meet the internal demand for coking coal, resulting in a significant gap. As of November 2023, the production of coking coal reached 450 million tons, which is the same as the same period in 2022. In addition, downstream demand has increased in an orderly manner, with a total iron production of 87.1013 million tons in 2023, an increase of 7.185 million tons compared to 2022. Therefore, there is still a gap between the supply and demand of coking coal, and the overall price of coking coal will show strong performance. However, winter storage is coming to an end, and the market contradiction before the holiday is not obvious. It is expected that coking coal will maintain stable operation. In terms of import and export, the overall coal import policy in 2024 will continue the tone of lenient imports in 2023, and the import volume of coking coal will continue to increase. It is expected that the import volume of coking coal in 2024 will increase by about 10-11 million tons compared to this year. It is expected that the price of coking coal will remain in the range of 1,500-2,500 RMB/ton, depending on downstream market demand.

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