The Balance of the Met Coke Market has Changed Dramatically Back to News

The global metallurgical coke market is forecast to reach 462.7 million tonnes by 2015, according to a new study by IntertechPira.

Based on extensive primary research, The Future of Metallurgical Coke to 2015 - Global Market Forecasts provides quantitative market sizes and forecasts over the next five years.

Most of the report deals with the major market for met coke - blast furnace steel production. The other much smaller sectors are the foundry coke market (over 20 Mtpy of global coke consumption outside China) and niche markets such as ferroalloy smelting, sugar refining, rockwool, production of phosphates and calcium carbide, and home heating. The report focuses on the key elements that will affect met coke demand in the global steel sector over the next five years. It also discusses the foundry sector and niche sectors of the met coke market. It forecasts the demand for met coke during 2010-15 based on primary research and expert technical insight.

The major market for met coke is the blast furnace or fully integrated segment of the global steel industry. Other minor users of met coke are the foundry industry, some producers of base metals and ferroalloys (FeMn and FeCr), and producers of non-metallic minerals such as phosphates, calcium carbide, soda ash and stone wool. The blast furnace segment also includes sinter plants that use coke breeze - the undersize (< 12.5 mm) portion of met coke - as a fuel for the sintering process. According to IntertechPira, the blast furnace and the supporting coke oven industry will continue to play a dominant role in China and the rest of the developing world (Brazil, India and south-east Asia) and in regions rich in iron ore and coking coal such as Russia and Ukraine. Despite the faster growth of electric arc furnace (EAF) steelmaking in Europe and North America, blast furnace steelmaking will still be important in Europe and North America.

Two things have driven recent dramatic changes in the met coke market: the world financial crisis led to a global oversupply of coke, and the Chinese government gradually eliminated coke exports by switching from subsidies to export taxes, now levied at 40%.

IntertechPira explains that the coke oversupply during the financial crisis arose because coke producers were unable to reduce coke production in proportion to falls in hot metal production. In a coke battery, coke production can be reduced only by about 30% by increasing the coking time. To go beyond 30% reduction, it is necessary to hot-idle the battery, but hot idling is risky for ageing batteries or batteries in poor shape. Consequently, large amounts of coke were stockpiled, so China's withdrawal from the coke export market has not yet been felt but this withdrawal, if sustained, could have a significant impact as global hot metal production and coke demand rebound.

As the global economy recovers, steel companies are gradually restoring hot metal capability, and coke stockpiles will probably be used first. After the stockpiles have been depleted, IntertechPira predicts coke shortages could develop, especially if steel producers are reluctant to restart idle coke batteries due to economic uncertainty, or unable to restart idle batteries because they have deteriorated. Shortages of coking coal or coal for blast furnace injection could increase coke deficits. Coke shortages could revive the merchant coke market.

The future growth of steel demand and of steel exports from China is very uncertain. In 2009 growth in steel demand and production was much higher than anyone expected, due to the Rmb4 trillion recovery package and big investment in railways and infrastructure. There is considerable doubt about whether this will continue, and indeed whether China is heading for a financial crisis of its own, with a collapse of steel demand.

It is possible that many ill-founded investment projects which started as a result of overly free money in 2009 will be cancelled or halted and that steel demand will fall. If steel demand were to fall, it could take a few years to recover. This is what happened after the south-east Asian crisis of 1998-99, also caused by overinvestment. According to IntertechPira, overcapacity in the Chinese steel industry could cause China to become a big steel exporter again when the world recovers; this will limit steel production in many other parts of the world. Forecasts of regional hot metal production for 2011-15 in the report are taken from various sources and make these key assumptions:

- Steel consumption and production in the developed regions - North America, Europe and developed Asia - will recover slowly from the financial crisis. Full recovery will be in 2011-12 and may not match the peak production levels of 2007.

- Growth in steel consumption and production will shift to the developing world - China, India, south-east Asia and South America - where there will be some new greenfield projects.

- Pig iron will continue to grow in China but more slowly than during the 2000s.

- Production in the Middle East and similar regions will continue to grow, using direct reduced iron (DRI) and electric arc furnaces (EAFs).

IntertechPira expects steel producers to reduce their structural coke deficits. They will do this by building heat recovery coke batteries or by-product coke batteries, according to regional preferences, rebuilding coke batteries, expanding or installing blast furnace coal injection facilities, improving blast furnace raw materials and equipment, and transferring coke supplies between companies. If the financial crisis delays coke deficit reduction, there could be a tight coke market to 2015; the biggest uncertainty is over Chinese coke exports.