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Coal tar prices reach new highs, rising 150% in a year. Author/Source: Sinochem News Network. Date: 2021-06-04. Clicks: 2. After the May Day holiday, the already high domestic coal tar market saw further increases driven by the sharp rise in the price of coal tar pitch, which is a key downstream product. As of June 2, the prevailing transaction price of domestic coal tar had risen to 3,800–4,200 yuan per ton (the same unit applies below), with a month-on-month increase of over 13%. Since the rebound began at the bottom level in May last year, coal tar has seen a consecutive 150% increase over the course of one year, with prices reaching new highs in recent years. “The recent rise in the price of coal tar is driven not only by factors from downstream industries but also by expectations of a slowdown in the future increase in available coal tar supplies, as well as the impact of macro policies related to carbon peak and carbon neutrality on the coal chemical industry. ”Analysed Shao Huiwen, a senior market commentator. Surge in prices of downstream products According to statistics from Henan Chemical Industry Network, as of June 2, the prevailing transaction prices for medium-temperature coal tar pitch and modified coal tar pitch in China had risen to 5,000–5,300 yuan and 5,300–5,600 yuan respectively. In some areas, the price of modified coal tar pitch even exceeded 6,000 yuan, reaching a new historical high. Moreover, in this market trend, the increase in just half a month has exceeded 41%. Shao Huiwen stated that coal tar pitch is the dominant product, accounting for over 50% of the products derived from the deep processing of coal tar; increases in its price directly affect the market trends of products throughout the entire industry chain related to the deep processing of coal tar. Due to the sudden surge in coal tar pitch prices, the long-term losses of enterprises engaged in deep processing were reversed, enabling them to shift from losses to profits. At the same time, the prices of processed products such as industrial naphthalene, anthracene oil, and washing oil also increased to varying degrees, which in turn supported the market for coal tar. Furthermore, in May the overall operating rate of enterprises engaged in the deep processing of coal tar was 53%, up 4% on a month-on-month basis; this further increased demand for coal tar, contributing to an upward trend in its prices. Slowing supply of raw materials According to data from 230 independent coke producers across the country, the overall operational rate, after taking into account capacity that has been phased out, is 89.2%, representing a 5% increase on a month-on-month basis. “Given the existing domestic production capacity, along with the increasingly strict environmental regulations in various regions, as well as the restrictions on ‘high-energy-consuming and high-emission’ industries such as coal chemical processing and coking, the production capacity for coal tar in May has been largely utilized. It is unlikely that there will be a significant increase in production in the future; instead, there may be a trend of decline. ”An official from a coking enterprise in Inner Mongolia analyzed. Huo, a trader from Liaoning, said that in addition to the reduction in supply, the continuous rise in coal tar products is also fueled by speculation on the part of traders. “Since last year, traders have been stockpiling goods at low prices in large storage areas across the country, such as Huanghua and Tangshan in Hebei, as well as Yingkou and Panjin in Liaoning, which has resulted in the volume of coal tar in circulation not being proportional to the operating rates of coking enterprises. Furthermore, due to the shift of the coal chemical industry to the northwest region, large-scale coal tar storage companies have also emerged in Ningxia, Inner Mongolia, and Xinjiang; these companies acquire large quantities of goods at low prices in order to raise market prices at an appropriate time. There was a wave of profit-taking among these low-priced supplies in April, and as a result, there are fewer low-priced supplies available on the market; this is also one of the factors contributing to the continued rise in coal tar prices. ”Huo analyzed. Support from macro policies Recently, coal chemical enterprises across the country have been giving in-depth consideration to the strategies of achieving carbon peak and carbon neutrality put forward**, and this has a profound and wide-ranging impact on industries that rely heavily on coal, such as the coal coking industry. In particular, coal coking projects that are part of the process to phase out outdated production capacity, as well as companies that are planning to launch such projects, are subject to significant impacts. Even without considering new projects, there are concerns regarding whether the existing projects will be able to operate at full capacity. From another perspective, this also presents development opportunities for the coal tar industry chain; it is unlikely that such products will be available at low prices, and mid-to-high price levels are likely to become the norm. Additionally, China’s purchasing managers’ index shows that in May, the manufacturing PMI stood at 51%, a slight decrease of 0.1% from the previous month; the non-manufacturing business activity index and the composite PMI output index were 55.2% and 54.2% respectively, showing increases of 0.3% and 0.4% on a month-on-month basis. Overall, China’s economy has continued to remain stable. Industry experts analyze that, taking into account changes in both the micro and macro environments, the coal tar end-market is likely to experience a new round of recovery. In particular, if the downstream markets for coal tar pitch continue to grow steadily, coal tar prices are expected to reach new levels. However, some market experts warn that there are still many uncertainties in both the international and domestic environments. Therefore, companies in the supply chain should be cautious about avoiding risks during periods of high prices, in order to prevent sudden events from having an impact on the market. It is not recommended to stock up large quantities of goods or engage in speculation at this stage.