Those of you who receive our regular weekly update on the carbon market will probably have noticed just what a sorry state China’s raw materials market is in right now.

Two examples in this week’s report illustrate:

* Calcined coke prices are now below the high end of the green coke price range. Not by a lot, and only at the top end of the range, but given a yield factor of 80% in the transition from green to calcined, the should be a premium for calcined coke, not a discount.

* Aluminium fluoride prices dropped RMB300 this week. There has been a series of measures to reduce output across the industry, in the hope that the price would hold or even rise. But those measures were always going to be difficult to retain for very long. There was a drastic reduction in output a couple of months ago, and again at the start of July, but the resolve amongst producers seems to have collapsed. Outcome = a drop in the market price.

It is at first glance a little hard to reconcile falling raw materials prices with rising metal production, but we think the market had already factored the metal equation into the pricing, and in fact were expecting more demand than what we are seeing.

This would help explain why coke prices were supposed to go up by the end of July (see our post of about 3 weeks ago), but have held largely steady, and why calcined coke prices seem to be so low, relative to GPC. The market was expecting things to be a lot more buoyant by now, with one third of the third quarter now gone, and so far no sign of the supposed H2 improvement.

PS - if you haven’t been receiving our weekly report, contact us at enquiries@az-china.com.