December 03, 2008

Chinese coke makers to hike prices to offset cost increase

It is reported that Chinese coke companies are pushing for price advances for April productions during the price negotiation with steelmakers as cost rises have severely squeezed their profit margins.

Coke index launched by China Coking Industry Association has jumped from more than 200 points to over 300 points during late 2005 and 2006. In the meanwhile coke price has surged to CNY 1900 per tonne from CNY 800 per tonne to CNY 900 per tonne. But according to an official from China Coal & Coke Holdings Limited despite several price improvements in last year, coke industry could merely maintain a low profit level approximately 5% owing to rising prices for raw materials.

Listed companies in the industry include ShanXi Coking Company Limited, Shanxi Antai Group Company Limited, Taiyuan Chemical Industry Company Limited, Heilongjiang Heihua Company, Limited, Changchun Gas Company, Limited, Kailuan Clean Coal Company, Limited and so on. Annual reports from some companies demonstrate gross profit margin of less than 20% owing to increasing costs.

Coal price increased frequently in the first half of 2006 with monthly increment of CNY 20 per tonne to CNY 50 per tonne. As China adjusted export policy for downstream steel industry for several times in the second half, export cost for steel products jumped and the frequency of coke price hike slowed down significantly. However, the root of coke price advances, coking coal price hikes still continue. Long term contract price for coking coal has gained 20% to 30% for 2008. Increasing cost still promotes coke price improvement.