Market Awaits Shandong Coke Control Measures

Coke market participants are watching closely what measures the government of Shandong province in eastern China can take to keep the province's coke production under control, as part of the province’s efforts to reduce coal consumption.

According to a document recently released to the market by the Department of Industry and Information Technology and the Shandong Provincial Development and Reform Commission, the province began collecting information from coke producers under its jurisdiction regarding coke production in January-May, as well as coal consumption over the same period and the destination of their products.

Those coke producers whose production in January-May exceeds 45% of their 2020 annual quota (allocated to producers by the Shandong provincial government in May 2020) will be ordered to either cut production or suspend operations, according to the document.

Mysteel Global said that in order to reduce coal consumption, Shandong, once a leading coke-chemical center in China, has begun implementing strict controls on coke production from May 2020. The government announced it would limit coke production in the province to 32 million tons by 2020, and set a maximum production for each coke plant last year.

Actual coke production in the province fell 32% to 31.6 million tonnes in 2020, according to the National Bureau of Statistics. A year earlier, Shandong was China's third-largest by-product coke base - after Shanxi and Hebei in North China - but due to a sharp decline last year, production in Shandong also exceeded production in Inner Mongolia in North China and Shaanxi in Northwest China.

Shandong's coke production fell 9.5% to 11.1 million tonnes between January and April this year, according to NBS.

“It is still unclear if the recent document could have a significant impact on coke production in Shandong,” said a source familiar with the Shandong coke market. With the exception of a few factories, most of the coke producers in Shandong are operating normally.

Renewed rumors of control over coke production in Shandong have again prompted some traders to return to the market to buy coke, an industrial source in Shanxi said. “We are seeing more orders (from Shanxi) destined for Shandong,” she said.

On the demand side, coke supplies to Shandong's leading steel mills are broadly stable, a Shanghai-based market analyst noted, and coke inventories at the mills are moderate.

As of June 8, the price of Mysteel Composite Coke for East China fell 21.6 yuan per tonne ($ 3.4 per tonne) for the week to 2,701.9 yuan per tonne, including 13% VAT.