Short-term still face inventory pressure, coke period price upward pressure is greater

From July 1 steil to July 5, the main contract of coke futures J1909 price showed a strong trend of shock, the main reason is that the market in advance reflects the spot three-round decline expectations, the market profit returns to reasonable, the market stabilization rebound confirmed that the cost support is effective;

Strengthen market supply-side contraction expectations.

Taken together, the medium-term upward trend is intact, and there is still demand for adjustment in the short term. On the coke supply side, on July 2, the General Office of the Shandong Provincial People's Government issued the Guidance on StrictControl of total coal consumption to Promote Clean and Efficient Use, which called for the formulation of a total coking industry capacity reduction and transformation and upgrading plan for the province's coking industry by the end of July 2019, and a clear reduction of coking capacity by 10.31 million tons in 2019. In 2020, the pressure will be reduced by 6.55 million tons, the supply supply will be reduced by 16.86 million tons in two years, and the supply-side contraction is expected to increase. Last week, the overall rate of coking enterprises remained relatively stable. As of July 5, according to statistics from relevant institutions, the sample capacity utilization rate of 100 independent coke companies in China was 80.66 percent, flat month-on-month.

Coking plant inventory slightly rebounded, coking plant due to the decline in spot prices, is currently in a micro-profit state, if the spot continues to fall may be a loss after the active production limit situation, superimposed Shanxi Province environmental policy rectification program will be issued, the supply side high supply state has a strong improvement expectations.


In terms of coke demand, due to Tangshan's larger production restrictions for steel enterprises, the implementation of strict rules, steel mills gradually implement production limits led to a significant decline in demand.

As of July 5, 163 steel mills nationwide operating at a rate of 66.30%, steel demand continued to decline, steel mills inventory level showed a small recovery; On the macro side, market participants analyze end-of-end demand or rebound in the second half of the year. On July 5, at the 2019 (fourth) China Steel Financial Derivatives International Conference, Ren Zhuxuan, assistant president of the China-Shanghai Steel Federation, said that real estate investment in the second half of the year is still resilient, while the high probability of a rebound in infrastructure investment, in the context of the rapid increase in local debt issuance, is expected to be released in the third quarter;It is expected to pick up from the bottom.

To sum up, the terminal demand rebound will enhance the focus of coke prices, in the short term coke demand end is difficult to effectively release, coke in the short term high supply status is expected to improve, port high inventory de-escalation still needs time;The current environmental limit production expectations dominate the forward market, the near future is still facing high inventory pressure in the port, in the short term J1909 contract will continue to upward pressure.

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