China Metallurgical Coke Drops 8.3% in a Week as Second Round of Mill Cuts Lands

Market Pulse Scope's China metallurgical coke benchmark, quoted in CNY per tonne, fell to 2,125 yuan a tonne on 16 October from 2,317.5 yuan a week earlier, a drop of 192.5 yuan, or 8.3%. The move reflects two rounds of mill-led procurement cuts, the second of which took effect at 00:00 on 12 October at 100 yuan a tonne for wet-quenched coke and 110 yuan for dry-quenched coke, applied in Hebei, Shandong and other northern markets. In Luliang, quasi-first-grade dry-quenched metallurgical coke was subsequently quoted at 2,070-2,080 yuan a tonne and first-grade dry-quenched at 2,180-2,190 yuan, both ex-works cash including tax.

Coking plants are now losing money. Shanghai Zhongqi Futures said the average independent coking enterprise was losing 52 yuan a tonne in the week to 19 October, yet regional plants kept operating rates high, sharpening the contradiction between high run rates and negative margins and pushing some producers to slow shipments and cap on-site inventory growth. Supply has also recovered on the raw material side: Mysteel's survey of 523 sample mines showed sanctioned capacity utilisation up 5.2 percentage points to 71.4% as Shanxi mines restarted after the holiday.

Demand is soft rather than collapsing. Daily hot metal output across 247 sample steel mills was 2.3366 million tonnes, down 18,000 tonnes on the week and 72,900 tonnes lower year on year, with further declines expected as blast furnace maintenance spreads across Tangshan and surrounding areas. Mills are buying only what they consume, and Lange Steel Network reported that coke inventories at independent coking enterprises have built for two consecutive weeks with the accumulation accelerating recently, while mill-side coke stocks remain around a two-year low, so this is slow restocking rather than a collapse.

The cost floor is firming, which is why traders see limited room for further cuts. Coking coal supply recovered more slowly than expected as Shanxi prime coking coal mines restarted behind schedule and Ganqimaodu Mongolian coal throughput stayed merely steady, and mainstream mines' online auction failure rates held at just 2%-5% with both low-sulphur and high-sulphur prime coking coal posting gains. Mysteel said most Shanxi independent cokers are now near breakeven or modestly loss-making after two rounds of cuts, with tariffs, crude benzol and other chemical by-products offering only a thin cushion.

The base case among Chinese brokers is one more round. Lange Steel Network warned that a third round of cuts looks likely and flagged the risk of further rounds plus regional catch-down moves if steel demand keeps weakening, while Mysteel said the negative feedback from mill losses is nearing its end and that the coke floor is well supported while hot metal stays high. Shanghai Zhongqi expects range-bound weakness rather than another one-way slide. Traders are watching coker margins, daily hot metal, Shanxi prime coking coal auction prices and coker inventory.