Some Chinese industrial insiders held a pessimistic view on the future coking market at a summit forum on the fuel supply of steel industry held by Umetal, a Chinese iron and steel consulting website.

    Coking enterprises are losing bargaining power and are in dilemma whether to cut down output for price maintenance or not, considering the high profit margin of coking products.

    According to Zhang Bochun, secretary general of Hebei Coke & Chemical Industry Association, coking industry has come across sales problems since this July with many steel enterprises limiting or stopping production.

    Besides, steel enterprises started to default in their payments. It is said that coking enterprises in Hebei province each encounters a default of 200 million yuan on average. The amount is expected to further increase, leading to serious capital problems.

    Since the coal prices did not drop and some even increased, coking enterprises suffered double blow from both upstream coal industry and downstream steel industry.

    At the same time, coal industry and steel industry are heading towards higher degree of industry concentration under the influenceof state macro-control. Some large steel groups are building supplying facilities such as coke ovens, in order to raise coke self-supply. All the above weaken the bargaining power of the coking industry, making it hard to shift the pressure of cost hike to the downstream.

    New coking facilities under construction will face big pressure upon completion. Zhang Bochun said many new coking factories would be ready to go into production in the following months and the first half of 2009, increasing the coking capacity by 10 million tons. Coke oversupply would go worse and weigh on the price.

    Coking industry associations in China's largest coal-producing Shanxi, Hebei and Shandong provinces have put forward the idea of cutting down coke output by 50 percent to hold the current price level.

    However, the insiders held that less coke production would lead to less output of coking products, which are of high prices and are very important profit sources.