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Coke prices soaring why companies are not happy
Since the beginning of this year, coke prices have surged again after a sharp increase last year. Within just three months, the ex-factory price rose from 1,400 to 1,800 yuan/ton at the end of 2007 to 1,800 to 2,200 yuan/ton, marking an increase of nearly 30% and an average monthly rise of over 100 yuan/ton. In theory, such a steep price hike should have brought substantial profits to coke-producing companies. However, when interviewed by reporters, many coking firms claimed they were only making small profits, with some even stating they had "lost profits."
At Shanxi Changzhi Coking Co., Ltd., the ex-factory price of coke is now between 2,150 and 2,200 yuan/ton, up by 500 yuan/ton compared to the end of last year. The company reported smooth sales and almost no inventory. Yet, when asked if their profits had increased in line with the price rise, the company’s office director, Wan Liping, responded with a firm “No.†He explained that while coke prices went up, the cost of coking coal also skyrocketed. The factory price of coking coal has exceeded 1,000 yuan/ton, up by 250 yuan/ton from last year. Combined with rising labor and sewage costs, the gross profit per ton of coke is only around 200 yuan, which hasn’t seen a significant increase.
Similarly, Shaanxi Shaanxi Coke Group, one of the largest coking enterprises in Shaanxi Province, reported that the ex-factory price of coke is now 1,950–2,000 yuan/ton, up by 400 yuan/ton from the end of last year. However, the price of high-quality coking coal in Shanxi and Hancheng, Shaanxi, has also soared, reaching over 1,200 yuan/ton. Additionally, the price of high-sulfur bituminous coal in Huangling, Shaanxi, jumped by 300% compared to the end of last year. These increases have pushed up the cost of coke by about 400 yuan/ton. When combined with transportation, environmental protection, and labor costs, the total cost per ton of coke has risen by 500 yuan—eroding all the gains from the price increase and even cutting into profits by more than 100 yuan per ton.
Guizhou Huaneng Coking Gas Co., Ltd., however, faced losses during this period. According to Dong Dongqiang, the company’s marketing manager, the current coke price is 1,800 yuan/ton, but the cost of raw coal used for washing is already 1,500 yuan/ton. This means that the raw material cost alone exceeds 2,000 yuan per ton, and when other expenses are added, the company is losing 200–300 yuan per ton. Furthermore, due to railway transportation shortages, coal and coke must now be transported by road, significantly increasing costs and limiting the ability to raise coke prices. As a result, Guizhou's coke prices are generally 100–200 yuan/ton lower than the national average.
Many coking companies, including Inner Mongolia Qinghua Coking Group, Shanxi Coking Group, and Shaanxi Black Cat Coking Co., have echoed similar concerns. They noted that the rate of increase in coke prices is far lower than that of coking coal. As a result, coke itself is not profitable, and the real earnings come from by-products. A representative from Inner Mongolia Qinghua Group stated that future competition among coking companies will no longer depend on the size of coke production, but rather on the number of by-products and the length of the industrial chain. Companies that focus solely on coke production face a bleak future as coal prices and environmental costs continue to rise.
The president of the China Coking Industry Association warned that coking enterprises are facing multiple challenges, including domestic coal supply issues and disruptions caused by the 50-year flood disaster in Australia, which has led major international suppliers like BHP Billiton to reduce coking coal exports. This has tightened the supply of coking coal, while steel companies may resist further price hikes, putting pressure on coke producers' profitability. To survive, companies must focus on recovering by-products and extending their industrial chains, ensuring long-term competitiveness in a challenging market.