- Market prices for different coke grades - Coke battery closures in 2008-9 and their future impact on the market - Future Chinese policy on exports - Coke demand outlook Andrew Jones, Analyst, RESOURCE-NET, Belgium

1. “Outlook for Coke Market in 2010
& Beyond”
Andrew Jones
Resource-Net
Brussels, Belgium
Intertech-Pira’s Met Coke World Summit
Pittsburgh, USA
October 2009
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2. Comments on Coke Market
In the first half, demand issues took centre stage as the next slide shows; world iron output declined
from ~1bn tonnes annualized in middle of 2008 to <0.8bn tonnes at year-end. However, by August
annualized output had recovered to 962m tonnes.
Coke prices on “fob China basis” have lost their value as the main benchmark for the world market. The
40% export tax levied by the government since August 2008 makes transactions unworkable.
Current indications are at $400/tonne fob for BF coke, compared to Indian import price of around
$300/tonne cfr. There is a belief in the market that the tax will remain in place until the end of the
year, maybe longer.
Supply continues from other sources in line with market demand e.g. Poland, Russia, Ukraine,
Colombia, Japan etc. Note that most of these sources primarily supply the western hemisphere,
whereas most demand is in eastern hemisphere…
However, we will show that if Chinese coke continues to be kept from the market, there will be a
market shortage from 2011. Difficult to see how supply from these other sources could fill the gap.
Adding to market tightness will be around 10m tpy of permanent coke capacity closures enforced by the
economic crisis of the last two years.
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3. World Iron Output &
Commodity Markets
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4. Global Annualized Pig Iron
Output Data
Ø Annualized world iron output collapsed
from >1bn tonnes in mid 2008 to 762m
tonnes in December; followed by
recovery in 2009. By August, iron
output was 962m tonnes, almost at
“pre-crisis” level.
Ø Increases in most regions of the world
over the past six months. In Europe and
N America, there were blast furnace
restarts from around July onwards.
Ø In the first half of 2009, China was the
main “engine” of the growth, but its
output was stable in August from the
previous month.
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5. Iron Output by World Region
Ø This chart shows iron production for
the major producing regions over the
past three quarters.
Ø There have been moderate increases in
all regions in the third quarter
(estimated from July & August).
Ø The decline in iron output this year
have had a severe impact on the
markets for coke, especially as
conventional coke batteries cannot be
allowed to go cold as blast furnaces
can be; this led to sizeable stock builds
of coke in the first half of the year,
when approximately 40-45% of blast
furnaces in Europe were idle.
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6. Pricing for Coke Indexed vs
Steel & Other Raw Materials –
2008-09
Ø Following catastrophic declines in the
second half of 2008, most commodity
markets have seen some recovery this
year, oil especially.
Ø In last few weeks, some evidence of
slowdown in market, prices flattening
out.
Ø As has been typical in recent years, the
freight market has been extremely
volatile, peaking in June cooling off
thereafter.
Ø Coke - EU price is shown - lagged coal
and steel markets until recently...
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7. Coke Pricing & Trade
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8. Chinese Coke Price vs
Exports
Annual coke exports from China
maintained at 14-15m tonnes after
2000.
12% ash coke price averaged
$556/tonne in 2008, double the
previous year’s level. Exports
declined to 12.1m tonnes.
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9. Blast Furnace Coke Pricing
Ø Due to 40% export tax applied from
August 2008, pricing from China is
uncompetitive in world markets.
Exports were just 230,000 tonnes in the
first half 2009.
Ø On a nominal basis, Chinese export
price was more than $400/tonne fob in
the first half of the year.
Ø There is a current mismatch between
Chinese export prices and indications
from other regions, as shown in the
chart.
Ø Price indications are sourced each
month directly from traders active in
the market.
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10. Key World Coke Exporters
Ø The 40% export tax is making trade in
Chinese coke unworkable for most
countries, hence there will be radical
decline in its exports in 2009.
Ø Declines from other major coke-
exporting countries this year - except
Japan. Absence of Chinese coke has
created new opportunities in Asia,
including 75,000 tonnes to China from
March to July…
Ø Poland: mainly supplies other European
countries, though sales to India, Iran and
Pakistan start in last two years.
Ø Colombia: traditional markets in Latin &
North America, but also supplies Europe
and India.
Ø CIS (Russia & Ukraine): becoming
important suppliers to Middle East &
India in absence of Chinese coke.
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11. Cross-Border Trade in Coke by
World Region
Coke Imports, million tonnes (As % of Demand)
2005 2006 2007 2008 2009 (e)
Europe 11.1 (21%) 12.3 (23%) 12.5 (23%) 12.0 (23%) 6.3 (19%)
CIS (fmr Soviet Union) 2.0 (4%) 2.2 (4%) 3.4 (6%) 2.7 (6%) 1.1 (3%)
North America 3.8 (16%) 4.2 (18%) 3.0 (13%) 5.0 (21%) 0.9 (7%)
Latin America 2.1 (19%) 1.9 (16%) 2.2 (17%) 2.6 (19%) 0.6 (6%)
Sub-Saharan Africa 0.4 (14%) 0.4 (12%) 0.6 (16%) 0.5 (15%) 0.3 (11%)
Maghreb & Middle East 1.2 (18%) 1.3 (18%) 1.2 (18%) 1.2 (19%) 1.0 (20%)
Asia 5.8 (2%) 7.4 (2%) 8.8 (2%) 5.5 (1%) 3.0 (1%)
Australia 0.1 (2%) 0.0 (-) 0.1 (3%) 0.1 (3%) 0.0 (-)
Total – a 26.5 (6%) 29.5 (6%) 31.8 (6%) 29.6 (6%) 13.1 (3%)
a – from all sources, including countries within the region.
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12. Coke versus Coal Pricing – By
Quarter from 2006
Ø Charts shows coke prices (Indian)
plotted against hard coking coal price.
Ø It seems as if coke price has become
“leading indicator” of the direction of
the hard coking coal price.
Ø Rise in coke price in current quarter to
$300/tonne cfr indicates some kind of
balance against contract hard coking
price.
Ø However, spot coking prices have risen
to $155-165/tonne in August.
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13. Coke Production &
Capacity Outlook
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14. World Coke Output versus
Ratio to Iron Output
Rise in coke / iron ratio in
2009 to 0.60 indicating
over-production of coke –
but mostly in China.
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15. Coke Production by Region
Ø World coke production has
become increasingly dominated by
Asia, and in particular China, over
the past decade.
Ø Asian coke production more than
doubled from 1998 to 2008.
Ø In contrast, European coke
production has fallen by 18% over
the same period. In North
America, it has declined by 22%
using the same comparison.
Ø The Fmr Soviet Union (CIS) has
also seen some increase in coke
production, up by 29% over the
past ten years.
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16. Coke Capacity Developments
Country Capacity, M tpy Increase in Capacity Developements
over Five
2003 2008 Years
Europe 54.0 58.0 +4.0 Programme of battery rebuilds ongoing in Poland, as well as Bosnia, Czech
Rep, Germany and Hungary HKM expansion postponed again in 2009.
.
Permanent closures in Bulgaria, Czech Rep, Poland and Romania in 2008-09.
FSU / CIS 66.8 69.5 +2.7 Many new and replacement batteries in Russia and Ukraine. Novolipetsk
Steel closed four batteries in 2008-09.
North America 22.8 23.6 +0.8 Sun Coke built 0.5m tpy plant at Haverhill in 2005, doubled in 2008. Also,
projects at Middletown and Granite City. Indianapolis Coke closed in 2007.
Latin America 10.6 14.6 +4.0 In Brazil, Sun Coke completed plant at CST in 2007. There are also projects
at Acominas (complete) and Usiminas. Tentative expansion plans in
Colombia from 2010 onwards.
Africa 3.3 4.1 +0.7 ArcelorMittal built 0.5m tpy battery in 2006 to supply ferrochrome market.
Coke plant completed in Zimbabwe end of 2009.
Maghreb & 7.4 9.0 +1.6 New plant in Iran completed in 2008. In Turkey, Isdemir restarted some coke
Middle East capacity in 2007.
Asia 295.0 494.9 +199.9 China accounts for most new capacity. India has also added batteries though
many are not cost-effective because of coal cost and availability. Tata started
1.6m tpy plant in 2007-08 in West Bengal. In addition, there have been
expansions in Japan and Korea.
Australia 3.5 3.5 0.0 No new investments in capacity.
Total 463.5 677.2 +213.7 Outside China, net change in world coke capacity is 22.7m tonnes.
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17. Known Permanent Coke Battery
Closures 2008-09
Location Total, M tpy
Kremikovtzi, Bulgaria All operations stopped indefinitely October 2008. 1.42
OKK Sverma , Czech Rep One battery (#3) closed in Q3, #4 to stay open. 0.34
ZKS, Carling, France No buyer found for plant by end of August deadline, hence 0.85
closure is probably imminent.
ISD Polska, Czestochowa, One of two batteries closed in May 2009. 0.32
Poland
ArcelorMittal, Krakow, Two of three batteries closed. 0.75
Poland
ArcelorMittal, Zdzieszowice, Two batteries (#1 and #2) closed in 2009. 0.60
Poland
ArcelorMittal, Galati, Five remaining batteries closed in June & July 2009. Coke 2.26
Romania will be sourced from Poland.
Novolipetsk, Russia Two batteries were closed in October 2008, two more in 2.46
February 2009.
Zapsib, Novokuznetsk, Russia One battery closed permanently in 2009. 0.65
Total 9.65
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18. Summary &
Conclusions
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19. Historical & Forecast Demand
for Cross-Border Traded Coke
Line indicates expected future
export potential for coke from
major exporters, assuming
Chinese exports limited to 1m
tpy.
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20. Reasons Why Coke Likely to
Remain in Short Supply
Belief in the market that China will not reduce the 40% tax on coke exports in the near future, despite
diplomatic pressure from the EU and the US; the China Coke Association indicates that it will not be
in 2009. Once demand for cross-border coke trade returns to historical level of around 30m tpy (by
2012?), it is impossible to see how other countries can compensate for the loss of China’s 14m tpy
export capacity.
Permanent closures in 2008-09 of coke capacity totaling almost 10m tpy at nine sites mainly in eastern
Europe, largely enforced by the market collapse (total world capacity outside China = 272m tpy end
2008). This will lead to a reduction in coke export capacity from Poland and Czech Republic, two
main suppliers of merchant coke to the rest of Europe. Also, in early 2009 the HKM coke plant
expansion (1.1m tpy) in Germany was postponed for a second time. (Other projects in Japan, Korea
and US still proceeding.)
Start-ups in 2009-10 of blast furnace capacity in Asia with no associated coke plants e.g. Ann Joo in
Malaysia, Tata Steel in Thailand (both 0.5m tpy), Dragon Steel in Taiwan (2.5m tpy) (to be supplied
by parent company China Steel?). Adds to large merchant demand in India for merchant pig iron,
ferroalloys and soda ash production.
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