Ninety-three coke companies in north China's Shanxi Province, the country's largest coke producer, have signed a self-disciplinary act to cut output and fix a benchmark price in a bid to gain a bigger say on the international market.

These companies, all members of the Shanxi Provincial Coke Industry Association, dubbed the "OPEC" of local coke producers, have agreed to cut their coke output by 20 percent to 40 percent in upcoming three months.

The association estimates the amount of coke output to be cut at 6 million tons in the period from now to September in Shanxi, which provides 48 percent of all the coke traded on the world market.

Shanxi Province produces 50 percent of China's coke and provides 80 percent of the country's exports. It produced 80 million tons of coke last year.

The 93 coke producers, who turn out 70 percent of the coke in Shanxi and provide 60 percent of China's coke exports, are also working on a fixed benchmark price to protect themselves as well as the whole industry, an official with the association told Xinhua.

The base price will be fixed by the trade association through state-of-the-art information devices and scientific methodology, after taking into account market factors, supply and demand, energy efficiency and macro policies, they said.

The association will also set up an expert panel to study the international coke market and industrial growth, and observe changes in demand and supply.

Analysts say coke is the only energy product for which China traditionally has a say on the world market. But the irrational expansion of production since last year has caused a surplus of the product on the international market, leading to drastic price slumps and leaving the domestic industry in the red.

Climbing coke prices on the international market since 2001 drew many local businesses to try their fortune in the coke industry. As a result, local coke production capacity doubled over the past two years to reach 80 million tons in early 2005. But, the average price per ton drop from 400 US dollars in early 2004 to present 160 US dollars.

According to figures provided by Taiyuan-based provincial customs, coke companies in Shanxi exported 3.09 million tons of coke in the first five months of this year, a rise of 29 percent over the same period of 2004, but the export value dropped by 12.41 percent year-on-year and the average export price stood at 207 US dollars per ton, compared with 276 US dollars in 2004.

Despite a 30-percent rise in output, insiders say coke companies in Shanxi Province suffered a 30.7-percent decline in profit since the beginning of this year. Some businesses are on the verge of bankruptcy.

Significant price falls have drawn widespread attention from the government and industry alike and coke businesses have been told to rein in production and fix a minimum price that will hopefully protect the domestic industry from cutthroat bargaining and anti-dumping investigations from abroad and prevent speculation at home.

Analysts say the voluntary move to cut output will also help the domestic industry establish more brand names and will be of relevance value to the real estate, steel, machinery, automobile, shipbuilding and many other sectors in their international competition.

China's coke sector started to boom in the 1970s, when most developed countries reduced their own coke production to protect local environments.

Source: Xinhua