The coke industry is more resistant to mergers and reorganization

According to China Drying News, July-September last year, domestic coke ventures began to suffer a lot, and major losses made them usher in a severe test. For this situation, Dang Yanming, a coke analyst at Wanda Futures, said to the Futures Daily reporter that the root cause of the problem was: “The production capacity of the coal-coal steel industry chain has expanded blindly and the production capacity of the domestic coke industry has been seriously oversupplied.”

"Sandwich cookies" are not easy

National Bureau of Statistics data show that in the first 11 months of last year, China's coke production was 40,551.4 million tons, an increase of about 4.97% year-on-year. According to statistics, the apparent consumption of coke in the first 10 months was 21,890,000 tons, while exports were still sluggish due to high export tariffs of 40%.

This is compounded by the fact that, for the purpose of prolonging the industrial chain and reducing costs, the new coking project of the upstream coal enterprise and the downstream iron and steel enterprises of coke continues to be launched. “The overall coke production capacity continues to increase continuously.” said Li Ting, the China Business Productivity Promotion Center. It is understood that from 2007 to 2012, domestic coke production increased from 329 million tons to 440 million tons, an increase of 111 million tons.

"Because the coke oven repair cost is equivalent to 60% of the new coke oven, once the coke oven is shut down, it is equivalent to scrap." Li Ting said that China's coke industry is in an embarrassing situation of overcapacity but difficult to stop production, although 40% of the export tax on coke is Cancellation, but this is difficult to change the current situation of coke supply and demand imbalance in the short term. It is understood that on January 1, 2013, the State Council implemented the cancellation of 40% of the export tariff on coke, and then the Ministry of Commerce and the General Administration of Customs cancelled the coke quota system and changed it into an export licensing system.

“For the coking industry, only the improvement of the economy of the downstream steel industry can boost its prosperity.” Li Ting said that the current overcapacity of the steel industry in China has become an indisputable fact. Under such circumstances, the room for steel price increase is limited. Steel prices can only push down the price of coke. In the upstream coal-producing areas, coal mine consolidation has led to a significant reduction in the number of coal producers, tight coking coal resources, and rising prices. Some independent coke enterprises that have not established long-term cooperation agreements with coal companies have even failed to buy coal.

In addition, it is worth noting that the downstream iron and steel conglomerates have stable and exclusive sales of their coking plants, and their capacity utilization rate is relatively high. "When market demand decreases and prices fluctuate, steel companies will firstly reduce external coke purchases to ensure the digestion of their own coke plant capacity, and to push prices for independent coke plants." Li Ting said that upstream and downstream pressures promote small independent coking The large number of enterprises closed, and the loss of large and medium-sized enterprises is not uncommon.

Greater resistance to mergers and reorganizations

According to statistics, as of now, the number of coking enterprises in Shandong Province is 58, of which the independent coke companies account for more than 80%. “October 2012, after the transformation and upgrading of the coking industry in the province, the pace of mergers and restructurings of coke enterprises was not significant.” Analyst Wang Yan of Qingdao Commodity Exchange Center analyzed that with the recent rise in coke prices, the efficiency of independent coke enterprises turned slightly. Well, this will bring some resistance to the merger and restructuring of the coking industry.

As the country's largest coke producing area, Shanxi Province currently has a production capacity of 160 million tons of coke. In May 2012, Shanxi began to implement mergers and reorganizations in the coking industry, trying to shift from "focusing on volume" to "controlling quality." However, the progress of this work is not optimistic. "Small-scale coke enterprises are generally unwilling to be eliminated or merged and restructured. If they are merged, we can only participate in shares and cannot hold shares," said a person in charge of a small independent coking plant in Shanxi.

In this regard, an industry insider said that the merger and reorganization of coke, although to a certain extent, to improve the degree of industry concentration, increase the coke price bargaining power, but this can only make the coking industry temporarily out of the woods. "Iron and steel companies will continue to find ways to reduce production costs, and the proportion of self-produced coking coal will continue to increase. If coal and steel companies are not united upstream and downstream, the merger and restructuring of coke enterprises will still face a severe living environment."

In Li Ting’s view, if the independent coking industry wants to emerge from the current state of affairs, it must integrate with upstream and downstream coal and steel companies across industries to stabilize costs and markets.

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