It is reported that though prices for coke and coking products have climbed compared with those in Q4 of 2008, coke enterprises are unlikely to step out of the trough in this year and the industry will eye further fluctuations and adjustments with unavoidable integrations.
As steelmakers resume productions, demand for coke revives recently. Price of coke has gained 40% in recent two months and that of coking byproducts such as crude benzol and coal tar have also rebounded. Coke enterprises feel gentle pressure following a cold winter in Q4 of last year.
Insiders believed that there is limited space for further price upswings. Coking coal price may fall after coal mines restart productions in Mar, possibly driving down coke price.
As the biggest coke producer, China contributes 60% of the world's total coke output. In recent decade the world's coke output increase mainly concentrates in China but the country's coke industry just develops passively. Over 80% of China's coke output is provided by medium and small enterprises, with small scale, decentralized layout, obsolete technologies and managements, low environment protection level, heavy energy consumption and weak market competitiveness.
Insiders said that "Coke industry has been fueled by steel sector. The industry will face further adjustments and recombination in this year, as well as opportunities of the change of development mode, the advancement of enterprise technologies and the maturity of market development.”
According to Mr Yang Wenbiao secretary general of China Coking Industry Association, the recombination will occur in four aspects.
1. Developing steelmakers will lead to growing coking enterprises, mainly referring to coke enterprises that are affiliated to steelmakers. The birth of Hebei Iron & Steel Group brought the integration of coke enterprises under Tangshan Steel, Handan Steel and Chengde Steel.
2. The integration of steelmakers and independent coke enterprises. Pingdingshan Coal Group founded a joint coking company with Wuhan Iron & Steel Group last year, raising annual coke output by 6.6 million tonnes. The group hence became China's largest coke producer. Many coke enterprises are seeking strategic cooperators in similar ways.
3. The integration between coke enterprises. Reportedly 22 major coke enterprises in Shandong are planning to forge a 20 million tonnes coke group in the forms of merger, joint project, etc.
4. The recombination of coal and coke enterprises. Some coal enterprises have launched coking projects while coke enterprises try to gain stable raw material supply by cooperation with coal enterprises.
Besides, several members of Shanxi Coking Industry Association established Shanxi Union Coking Coal Company Limited last year end to start joint purchasing of coking coal.
Mr Wang Qingtao chairman of Shandong Coking Industry Association said that worldwide financial crisis and economic undulation in domestic market have brought a god opportunity for structure adjustment, optimization and upgrade of coke industry.
(Sourced from China Securities Journal)
