Entering the critical period of winter storage, steel prices are on the strong side

Looking back on 2023, the prices of coking coal and coke will show an overall trend of “declining first and then rising”, with the price center of gravity shifting downwards, and the price fluctuation range being significantly greater than that of rebar, iron ore and other products.
Looking forward to 2024, coking coal supply may remain stable and increase. Domestic supply tends to be stable, and the increase mainly comes from the import side. It is conservatively expected that China’s coking coal supply will increase by 7 million tons in 2024; demand-side coking production capacity may show a net increase. situation, the limited demand for raw materials is expected to be restored; the speed of destocking may slow down, but under the tight balance between supply and demand, the overall accumulation pressure is limited. It is expected that the average price of coking coal may move up slightly in 2024, and the price of coke will gain cost support. support.
The “double focus” market will first decline and then rise in 2023
From the perspective of operational logic, January to February 2023 will continue as a whole, with strong expectations for economic recovery after the gradual adjustment of national epidemic policies since November 2022, and the market is full of expectations for the spring market. The ferrous metal sector has been relatively strong, but Affected by the liberalization of imports of Australian coal (hereinafter referred to as Australian coal), the expectation of increased market supply has led to the overall performance of “double coke” prices being weaker than those of rebar and iron ore.
Entering March 2023, “Double Focus” ushered in a relatively smooth downward trend. At this stage, the prices of “double focus” and other varieties such as rebar and iron ore fell in resonance, which basically reflected the “weak reality” situation of relatively slow economic recovery and sluggish terminal demand, and the peak season demand was falsified. In addition, the import volume of coking coal has increased significantly year-on-year. Further destocking in the downstream and overstocking in the upstream have also intensified the bearish sentiment in the market. The price decline has continued until the end of May 2023. At this point, the “double-coke” has completed the first half of the “first suppression” period. “Quotes.
In June 2023, the “double focus” started the second half of the “post-rising” market. Policies at the macro level have continued to release positive signals, and the bearish sentiment in the ferrous metal market has gradually recovered. At the same time, coal mine safety inspections have been upgraded, which has pushed up coal prices. During this period, the market’s crude steel output regulation and the negative feedback demand from steel mills taking the initiative to reduce production due to losses are expected to disturb the “double focus” price, prompting a periodic correction in the “double focus” price. From October to November 2023, the State Council issued an additional 1 trillion yuan of special treasury bonds and major production accidents occurred in coal mines in main producing areas, driving up coal prices. In December 2023, market expectations shifted from “coal supply contraction” to “steel mill blast furnace production reduction, negative demand feedback”, and the “double burner” price shock was weak. However, although the price correction has increased, it has not yet fallen below the June 2023 level. rising trend since last month.
Overall, in 2023, the trading focus will still be on the logical changes in coking coal, including factors such as increased imports and periodic tightening of domestic supply. Coke itself lacks driving factors for rise and fall, and mostly passively follows the trend of coking coal. Looking forward to 2024, the trading pattern of “double-coke” varieties with coking coal as the focus will not change. Therefore, coking coal imports will still be an important factor affecting the supply side. At the same time, there are also expectations for an increase on the demand side. It is expected that the supply and demand of coking coal will be tightly balanced. will be maintained.
Domestic coking coal supply stabilizes
my country’s raw coal production will further increase in 2023, but coking raw coal is affected by factors such as coal quality and washing rate decline, and the growth rate of coking clean coal production is limited. In the first 10 months of 2023, my country’s coking clean coal production increased by only 0.5% year-on-year. Taking into account the further upgrade of regional safety production supervision in coking coal mines in November and December, it is difficult for coking coal production to increase year-on-year in 2023.
At present, coal mine production profits are significantly better than other links in the ferrous metal industry chain, which greatly increases the enthusiasm for coal mine production and is a powerful driving factor for increasing coal production. But at the same time, safety production supervision will only be strict but not lax. Therefore, on the whole, it is expected that my country’s coking coal supply will be difficult to increase in 2024 as the main production areas still face relatively strict restrictions on rectification and production guidance.
Imported coal remains the main source of incremental coking coal supply
Imported coal has always been an important supplement to the supply of China’s coal market. Since 2023, in order to strengthen domestic coal supply guarantee measures, the country has actively guided enterprises to stabilize coal imports. On the one hand, it has lifted the Australian coal import ban, and on the other hand, it has continuously optimized Mongolian coal customs clearance. measure. At the same time, in order to reduce import costs, my country will continue its zero-tariff policy on coal imports until the end of 2023. Data show that in the first 11 months of 2023, my country imported a total of 427.17 million tons of coal, an increase of 164.75 million tons year-on-year, an increase of 62.8%.
Relevant departments have recently adjusted the import and export tariffs on some commodities, but this adjustment did not mention coal. Starting from 2024, coal imports will return to the original tariff policy. For coking coal, after the tariff adjustment, import tariffs on coking coal from Mongolia, Russia, the United States and Canada will resume at 3%. Indonesia and Australia still maintain zero import tariffs due to free trade agreements. Taking the current coal imports from Mongolia as an example, After the restoration of tariffs, the cost of trading companies will increase by about 30 yuan/ton, but the current import profits are relatively good, and the overall impact is relatively limited.
It is expected that coking coal imports will remain in good shape in 2024. However, due to the large import base in 2023, the space for further increases in 2024 will be narrowed. The increase in coal imports from Mongolia is expected to be 5 million tons, and the increase in coal imports from Russia is expected to be 5 million tons. It is 2 million tons. The overall conservative estimate is that the increase in coking coal imports is 7 million tons, and the annual coking coal imports will exceed the 100 million tons mark.
Raw material demand is expected to improve
On the demand side, coke production will maintain steady growth in 2023. In the first 11 months of 2023, my country’s cumulative coke production was 450.4 million tons, a year-on-year increase of approximately 14.39 million tons, or 3.3%. Excessive coking production capacity has resulted in poor profits in the coking industry. Most of the time, it is near breakeven. Production capacity cannot be effectively released, and the capacity utilization rate is only about 75%. In October 2023, Shanxi Province carried out the phase-out and withdrawal of 4.3-meter coke ovens, with the withdrawal of production capacity exceeding 15 million tons. Some of the superimposed new production capacities failed to be put into operation as scheduled. In 2023, the overall coking production capacity showed a net withdrawal state, but it is expected to still be in 2024. There will be a net increase in production capacity. If production capacity is released, it will help boost demand for coking coal.
Inventories may stabilize at low levels
The overall inventory of coking coal in 2023 will decrease compared with 2022, but the destocking speed will slow down compared with 2022. In 2024, the destocking speed of coking coal may further slow down, and coking coal may even be accumulated again due to the continued increase in supply. However, due to the current low inventory level, the overall accumulation pressure is limited.
In addition, although downstream continues to adopt a low inventory strategy for raw materials, its replenishment efforts may increase as demand increases, thereby providing strong support for coal prices.