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Since mid-November, the domestic coal tar (mainly high-temperature coal tar) market has experienced a month-long period of recovery, reaching a peak in early December with transaction prices at 3,460 yuan per ton, representing a 14% increase on a month-on-month basis. However, after mid-December, market conditions deteriorated due to factors such as a general decline in prices across downstream industry chains and an increase in corporate capacity utilization. As of December 19, the prevailing transaction price of coal tar had dropped to around 3,300, reflecting a weekly decline of 4%, which led to a shift from an optimistic to a more cautious atmosphere in the industry, with downward pressure remaining evident in the short term. “The current shift from a strong to a weak market trend is driven by multiple factors: declining expected demand on the downstream side, a steady increase in supply among coking enterprises, and a pessimistic attitude among traders. These factors combine to prompt traders to quickly release their inventory and to lower their bidding prices, which could further exacerbate the negative trends in the market ahead. ”Analysed Chen Qiang, a trader from Liaoning. The entire downstream industrial chain is weakening. The cooling down of the coal tar market is due to the overall weakness of the downstream deep-processing industrial chain. According to statistics from Longzhong Information, starting from the first week of December, market conditions for downstream products of coal tar deep processing began to show a weakening trend, and a general decline set in during the second week. As of December 18, the transaction prices in the Shandong market for carbon black, coal tar pitch, industrial naphthalene, anthracene oil, washed oil, phenol oil, and light oil were 5,800 yuan, 4,150 yuan, 4,050 yuan, 3,350 yuan, 3,440 yuan, 3,450 yuan, and 3,750 yuan respectively, with weekly price declines of 1.7%, 1.2%, 1.22%, 2.9%, 1%, 5.5%, and 1.3%. Similar downward trends were observed in other regions of China to varying degrees. “As a core product of the deep processing of coal tar, the decline in coal tar pitch directly weakens the market’s only source of support. ”Chen Qiang said that this has further led to an expansion in the downward trend in the domestic coal tar market. Prices in Shanxi dropped first, with downstream factories showing a strong tendency to push prices down. Prices for new orders in Shandong and Hebei regions also began to fall successively; by mid-December, the decline had exceeded 100 yuan. With numerous negative factors in the market, it is possible that the coal tar market will continue to show a downward trend in the short term. Improvement in corporate capacity utilization: The continued easing on the supply side has further exacerbated the downward trend in the market. Data shows that as of the third week of December, the weekly capacity utilization rate of domestic coking enterprises remained above 73%, up by about 2% compared to the low levels seen in November, while coal tar production continued to grow steadily. Although coke prices have seen two rounds of reductions recently, the drop in costs for raw materials has led to increased profits for coke manufacturers. For now, the production pace of most of these companies has not slowed down; only in some areas has the production rate decreased slightly due to exhaustion of coal consumption quotas. Overall, the operating levels of domestic coking enterprises remain relatively stable, with no significant decline expected in the short term. More notably, the increasing concentration in the coking coal industry is amplifying the impact of changes in market supply and demand. A management official from the coking enterprise owned by Pingmei Shenma said that with the extensive application of coal tar hydrogenation technology in recent years, enterprises engaged in the deep processing of coal tar have largely achieved scale and concentration; as a result, the industry features a pattern of dominance by large companies, along with differentiated competition among smaller and medium-sized enterprises. Leading enterprises such as Baowu Group, Xinnuo Lixing Group, Baoshun Group, and Shanxi Coking have achieved scale advantages through mergers and acquisitions; the annual production capacity of each plant typically exceeds 300,000 tons, with some companies reaching an annual production capacity of 9.5 million tons. “Vertical integration has become key to profitability. ”The official revealed that companies that adopt a integrated approach involving coking, coal tar processing, and the production of end products can reduce their costs by 180 yuan per ton, with a gross profit margin that is 8 percentage points higher than the industry average. He also said that the synergistic effects within the upstream and downstream industrial chains have become faster and more pronounced; changes in the raw material markets for coal tar producers, as well as fluctuations in their capacity utilization rates, can quickly be reflected in changes in coal tar market prices. Against the backdrop of weakening markets in both upstream and downstream sectors, any increase in market supply is likely to have a greater impact on price fluctuations. A growing atmosphere of hesitation among traders The trading decisions of these traders are a key factor contributing to market volatility. Shao Huiwen, a senior market commentator, said that although the integrated development of the upstream and downstream sectors of coal tar is progressing rapidly, large-scale trading and distribution companies still play a significant supplementary role in the market. In particular, their practice of buying at low prices and selling at high prices contributes to exacerbating market fluctuations. When coal tar prices were at their lows in November, large quantities of the product bid for by companies in Shanxi, Hebei, Inner Mongolia, Liaoning and other regions ended up in traders’ warehouses. When prices rose to high levels in December, the release of these stocks by traders further contributed to a decline in market prices. According to various traders in Henan, Shandong, Hebei and other regions, amid the currently negative market conditions, traders are becoming more cautious, leading to a significant decline in their participation in auctions. For example, during the period from December 12 to 18, the final selling price for coal tar in Shandong Laigang’s auction was reduced to 3,320 yuan; the final selling price for coal tar in Hebei Huafeng Coal Chemical’s bidding process was lowered to 3,300 yuan; and the final selling price for coal tar in Shanxi Pengfei Group’s auction was reduced to 3,250 yuan. All these changes reflect shifts in market sentiment. Industry experts analyze that the market still may continue to decline due to inertia, but the operating rates of coking enterprises are expected to remain stable, and the supply of coal tar is relatively consistent, with no significant increase expected in the short term. At the same time, the overall operating rate of downstream deep-processing enterprises in the coal tar sector remains relatively high this year, with steady demand for raw materials. Therefore, it is expected that there will be little possibility of a significant adjustment in coal coking **prices, or they will mainly remain within a narrow range.