As said earlier, Huaan price will be suppressed until upliftment, spiced with ocasional cha-cha sessions. And this whole week is simply just a long cha-cha session (down to 21.5, up to 25, then down to 22.5) !

Wow, Linyi coke spot reach 2,200 today ! If this rate maintain for the rest of Dec, then Q4 coke spot average will be 1975, close to Q4 spot average. Add the higher profit from by-products, Huaan Q4 profit will be at least 3.5 sen, better than Q3 ! ....... and that has not factor in the profits from hedging and higher sale volume yet !

Wah .... cruise ship so fast set sail already ? I thought only after upliftment !
If it really start already, then It is still EARLY days as it will be on a long journey to 1.00. To reach by 2nd half 2018. Cheers !

But if coke futures continue to drop, should this be a concern?

On the face of it, it is a concern, but actually it could be a BLESSING IN DISGUISE !!!!

About 1 week ago, on 1/12/17, analyst already said the current coke futures rise will not last.

"焦炭基本面扭转颓势尚需时日。从基差来看，当前焦炭期价缺乏持续上涨的基础."
Still take time for coke to reverse the weak fundamentals. From the basis of difference, the current coke futures lack basis for continued rise.
http://futures.eastmoney.com/news/2226,20171201808131093.html

So when coke futures contract J1805 go above 2,200 for the past few days, Huaan may hedge (sell) the coke futures because coke price at 2,200, Huaan could make good profit. http://finance.sina.com.cn/futures/quotes/J1805.shtml

Let us say Huaan hedged (sell) only at 2150, and by January 2018, contract J1801 may bottom at 1800 and Huaan buy back at 1850, then Huaan will be making profit of 300 per ton (i.e 2150 - 1850) in hedging for Q1 2018 !!
This hedging 300 per ton profit will be added to the Huaan Q1'18 coke spot average to give Q1'18 another STRONG quarter again !!

But coke futures drop sharply today, will this may affect the spot rate?

Yes, drop in the futures will affect the spot, but NOT in the immediate term. Spot follow the futures in DELAYED fashion, delayed by several weeks to 1 month.

Coke futures (J1801) start to reverse and begin the rise from 1/11 (http://finance.sina.com.cn/futures/quotes/J1801.shtml) but Linyi spot only reverse and start to rise from 23/11. There is a delay of 3 weeks.

Similarly, as coke futures start to drop this week, so we expect spot will drop in about 3 weeks time. So in the meantime, Linyi current spot of 2,000 is expected to be maintained until late December.

Linyi coke spot reach 2,000 today. If this 2,000 is maintained for the rest of Dec, then Huaan Q4 coke average price will be 1,931. This is quite close to Huaan Q2 coke average of 1968.

So estimated Q4 earning = 1.9 + 0.58 + 0.53 = 3.01 sen

1.9 is the Q2 earning
0.58 is the Q3 by-products extra 6.5 millions profit (6.5 mil / 1,123 NOSH)
0.53 is the Q4 by-products extra 6 millions profit (6 mil / 1,123 NOSH)

If we factor in the profits from hedging (pls see my comment on 19/11) and 78% increase production volume (pls see my comment on 14/11), then Huaan Q4 profit will be more than 6 sen !!

Wow ... coal tar today up AGAIN, by 130 to 4411.75 !
Even if coal tar maintain this rate for the rest of Dec, it will make EXTRA 5 million ringgit profit in Q4 ! But coal tar is expected to go up further, so expect it will make extra profit of MORE THAN 5 million ringgit profit in Q4 ! This will boost Huaan earning greatly. Wonderful !
http://www.sci99.com/monitor-386-0.html

Keith, Linyi coke spot already 2000 TODAY !!
http://www.52steel.com/market/2017-12-07/a440989d-fed0-4f31-9a81-75ac7eebd9fa.html

Yes, agreed with you Keith. Despite all spheres of Huaan businesses showing MARKED improvement, its share price remain lacklustre. This is clear sign of price INTENTIONALLY pressed down. Really no cause for alarm, in fact is opportunity for collection. Just like I said earlier, Huaan price will be suppressed until upliftment from para 8.03a, which I guessed to be annouced on 22/12, for Huaan holders to have a Happy Christmas !

OMG, coal tar today up by 254 to 4282 !! On 9/10 it was only 2959.
It is moving closer to make EXTRA 5 million ringgit profit in Q4 ! CANTIK !
www.sci99.com/monitor-386-0.html

Thanks Keith. Just as I expected last friday that Linyi spot will soon move to 1900 and so soon today it reach 1900 .... just GREAT !!
At 1900, even Huaan coke itself is making good profit. Together with the by-products higher selling price (especially coal tar which itself could bring extra 5 mil ringgit profit in Q4), hedging profits and increased sale vol, Huaan is going to have a GREAT Q4 !

Coal tar today up again by 129 to 4027.50 ! It is on its way to making extra 5 million ringgit profit for Q4.
www.sci99.com/monitor-386-0.html

Ticket to the speedboat was sold at 23. Now ticket to the cruise ship is selling at 22 ! I think that is a BIG BARGAIN. No wonder it also catch ah Leong attention !

Wow ... KLCIUP ..... really WELL SAID ! I take my hat off to you !

Keith, thanks for your feedback. I have totally opposite view. Based on a sci report and the increased inventories by 78% in Q3 report, I instead opined that Q4 production vol increased by 78% (pls see my comment on 14/11) ! If that is the case, then coal tar extra profit in Q4 will be more than 5 million ringgit ! Let Q4 tell who is right. No matter ehat it is, it will still be a good Q4.

By-product coal tar ALONE could bring extra profit of 5 million ringgit in Q4 !!

Pls see the first chart in http://cpb.hexun.com/news/7436

Q3 coal tar average price = (2775 + 2875 + 2931) / 3 = 2860
Q4 coal tar average price = (3085 + 3483 + 4300) / 3 = 3622
(The Dec price of 4300 is based on assumption that coal tar price, which now stand at 4000, continue to go up as expected)
Hence coal tar Q4 average price is higher than Q3 by 762 (i.e. 3622 - 2860)

Coal tar production is about 5% of coke production (http://www.sinohuaan.com/productions.html)
Q3 coke production was 210,000 ton, hence coal tar production = 210,000 * 0.05 = 10,500

Based on exchange rate of 0.62, coal tar extra profit in Q4 = 10,500 * 762 * 0.62 = 4.96 million ringgit or 0.44 sen per share (i.e. 4.96 mil / 1,123 mil NOSH) !!

Linyi spot should move to 1900 soon.

Wow .... Good News again !!

Coal tar price is expected to go up further in December !
http://cpb.hexun.com/news/7436

(1) "自9月国内煤焦油市场开启上行态势以来，据中宇资讯监测，本月市场已经是连续第三个月上调，并且较月初上涨750元/吨，涨幅达到23.08%，价格屡创新高，月底成功站上4000元/吨，并且市场依旧没有结束的意思，对于12月的市场场内期待值依旧较高."

Since the domestic coal tar market opened its upward trend in September, according to chem365.net monitoring, this month has been the third consecutive month of upward adjustment in the market, up RMB 750 / tonne from the beginning of the month, or up to 23.08%, with prices reaching record highs and end of month successful stand on the 4,000 yuan / ton, and the market is still not over, market for the December expected value is still high.

(2) "即将进入12月，中宇资讯认为，由于场内货源紧缺局面仍难缓解，并且下游厂家拿货积极性高涨，所以12月煤焦油价格没有最高，只有更高！"

Coming into December, chem365.net believes that because of the shortage of supply still difficult to ease, and downstream manufacturers goods procuring enthusiasm higher, so in December no highest, only higher for coal tar prices !

Keith, the 小哈图 quite a nifty tool, thanks.
http://xiaohatu.com/screen/598c11e0673c75002f420c0f/599abd8203c9a7002bbcaab7

Coal tar today up AGAIN ......... !! up by 120 to 3893.25. Total up by 934 since 9/10 !
http://www.sci99.com/monitor-386-0.html

Somemore the ticket is CHEAP ...... !!

Those who miss the speedboat in the last round, can now board this cruise ship. It will go the distance !

Apparently our Huaan is going crazy too ! It is now on CRAZY SALE !!

Wow ....... coal tar is going CRAZY !!!! Today up by 191 to 3773.25. Total up by 814 (or 27.5%) since 9/10 ! www.sci99.com/monitor-386-0.html

Thanks Keith. Linyi coke spot is coming back STRONGLY. It is going to do great for the spot average. CANTIK ........ !!

Earlier I said that Huaan hedges in the coke futures. That proposition is now strongly supported by this article dated 28/11/17
http://futures.eastmoney.com/news/1765,20171128806767516.html

(1) "市场人士：期货成黑色产业企业经营标配"
Market participants: Futures become "black" industries enterprises operating standards
(Note: "black" industries refer to steel, coke and coal industries)

(2) "在铁矿石供给总体过剩但结构化矛盾凸显的背景下，冬季高炉限产执行效果与预期的阶段性偏离进一步加剧了矿石、钢材等黑色系商品的价格波动。使用期货工具对冲风险几乎已经成为黑色产业链相关企业经营的标配"
In the context of the overall iron ore supply surplus but the obvious structural contradictions, winter blast furnace production limit and expected phased deviations further aggravate the price fluctuations of black products such as ore and steel products.
USING OF FUTURES TOOLS FOR HEDGING RISKS HAS ALMOST BECOME THE STANDARD OPERATION OF RELATED ENTERPRISES IN THE BLACK INDUSTRIAL CHAIN

(3) "企业使用期货工具渡难关保利润"
Enterprises use futures tools to overcome hardships and protect profits

(4) The article also quoted an actual example of hedging by Maanshan Iron and Steel Company (马鞍山钢铁股份有限公司) to make profit.

"2016年马钢共完成大宗钢铁热轧卷板卖出套保4.39万吨，螺纹钢卖出套保10万吨，铁矿石买入套保9.32万吨，铁矿石卖出套保20万吨，以及焦煤买入套保20万吨。最终期现货贸易统一算账计算盈亏，参与期货市场帮助企业增加收益1279万元"
In 2016, Maanshan completed a total of 43,900 tonnes of hedges for the sale of hot-rolled steel coils, rebar sold 100,000 tonnes of hedges, iron ore purchased hedges of 93,200 tonnes and iron ore sold hedges of 200,000 hedges ton, and coking coal buy hedging 200,000 tons. Finally futures and spot trades are combined to calculate profit and loss, participation in the futures market help businesses increase revenue by 12.79 million yuan.

** The Maanshan example show that futures and spot trading is combined to calculate the profit and loss. This is similiar when I add Huaan hedging profit to Huaan coke spot average to get Huaan effective coke average.

** You may note that Maanshan beside hedging its finished goods also hedged its raw materials.
Hence it is possible Huaan beside hedging coke in the coke futures, also hedge coking coal at the coal futures !

Coal tar today up again, by 62 to 3581.75, it has risen 622 since 9/10 (or 21%), cantik !
www.sci99.com/monitor-386-0.html

Sharks are no fool, they wouldn't circle the sea for nothing. Their presence here is clear hint that Huaan is good meat. Yum yum .......

Keith, wait until Q4, after that it will be on its journey to 1.00 ! That is why many sharks here, they know there are good food here !

I have on 23/11 commented Linyi coke spot has bottom and start to rise and it is on uptrend. Now even analyst echo my view !

"供需格局已有转变 焦市已走出风雨见彩虹"
The pattern of supply and demand has changed. The coke market has gone out of the storm to see the rainbow

"中宇资讯认为，焦炭此波上行之火已经开始点燃，上涨已是大概率事件."
In the opinion of chem365, this coke upside wave has begun to ignite, the rise is a high probability event

http://futures.eastmoney.com/news/2226,20171124805917626.html

For the upliftment, If Bursa follows the approval for extension to a tee, then Huaan will be presented with an early Christmas present on 22/12 !!

If Bursa earlier decision to grant Huaan extension up to 15/12 to submit a regularisation plan is used as a guide, then the upliftment of Huaan from para 8.03A may not get the approval so soon.

On 15/5, Huaan apply for an extension of time to submit a regularisation plan. The submission was due on 15/6. Bursa only grant the application on 23/6, after the deadline on 15/6 to submit the regularisation plan.

So this time, Bursa may grant the application for upliftment after 15/12, which is the extended due date to submit the regularisation plan.

If that is the case, then we can expect Huaan price to be suppressed for the next 1 month, spiced with occasional cha-cha sessions.

Yes, agreed with you Keith, as confirmed by the below analysis shared by you also, thanks.
https://cj.sina.com.cn/article/normal_detail?url=http://finance.sina.com.cn/money/future/rese/2017-11-23/doc-ifypceiq0297377.shtml&source=nfquote&vt

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Posted by Keith Han > Nov 24, 2017 06:48 PM | Report Abuse

Coke price will become more higher after March because policy over.. demand will suddenly boost up.

Earlier I have pointed out the importance of by-products to Huaan profit.

This importance of by-products is echoed by the below link, which point out that by-products provide competitiveness to coke producers (thanks to Keith Han who provide the link)
http://futures.jrj.com.cn/2017/08/28111523012271.shtml

"独立焦化企业除生产焦炭外，其竞争力主要体现在“化产”部分，即综合利用焦炭生产过程中的副
产品进行化工产品的生产."
"Independent coking enterprises in addition to the production of coke, its competitiveness is mainly reflected in the "chemical" part, that is, the comprehensive utilization of by-products in the coke production process for chemical products."

With this strong coke futures, it augur very well for the coke spot rate. Things are looking up !

@dompeilee, with due respect, in my opinion the real dark horse is the hedging. If Huaan hedgers are good, Huaan could make profit as much as 600 - 700 per ton during the coke futures last cycle of up and down.

Oh, there is a fourth horse running for Huaan, which is the increased production by 78% in Q4. Ha ha ... too many horses, loss count.

So now Huaan have 3 horses running for them.
1) profits from hedging (when futures price was sky high)
2) profits from by-products (selling prices which keep on going up in Q4)
3) stabilised coke spot price (Linyi coke spot has bottom and start to rise)

With collaboration of these 3 horses, Huaan is going to have an excellent Q4, rather than a poor Q4 as many have anticipated due to the depressed coke price.

Furthermore, today by-products prices up again ! Coal tar up by 75 to 3519.50 and crude benzene up by 50 to 6775. Since 9/10, coal tar has risen 19% while crude benzene has risen 10%. The by-products are going to bring good profit to Huaan in Q4.
http://www.sci99.com/monitor-386-0.html
http://www.sci99.com/monitor-377-0.html

Good news .... Linyi city coke price has bottom and today start to rise !
Linyi city coke price has been down for almost 2 months, from 2300 (on 29/9) to 1650 (22/11) and never up a single time during the period. But today it is up by 50 to 1700. This is a good sign of reversing.
http://www.52steel.com/market/2017-11-23/1a84e79e-ba4d-46dd-af8f-32c6ee27e673.html

Guided by the coke futures (which spot price follow in delayed fashion) which has risen steadily since early Nov, we can expect Linyi coke spot to rise steadily from now on. This will stabilise Q4 coke spot average, which today stand at 1938. Great !

Great thing will happen after Q4. Many will drop their glasses !

Though futures has up a lot lately, spot still at bottom. For those who follow spot rate (which is the correct method), DON'T worry, spot rate is reversing soon. Spot is always about 4 weeks SLOWER than futures !

See the comparision between spot (blue) and future chart. http://www.100ppi.com/sf/617.html
When future started to dive in mid Sept, spot remain high for the whole of Sept and even 1st half of Oct. Spot only start to slide in 2nd half of Oct (about 4 weeks later than futures).

From the chart, we can see that futures bottomed near early Nov and started to reverse. So we can expect spot to reverse by early Dec. So stay cool bros ........ in any event this low spot rates will be very well mitigated by hedging (as explained earlier).

Amazing, by afternoon, coal tar further up by 136 to 3445 ! Even crude benzene up by 100 to 6725 ! By-products are going wild ....
www.sci99.com/monitor-386-0.html
www.sci99.com/monitor-377-0.html

Wow, early morning coal tar alrdy up, by 39 to 3348.25 www.sci99.com/monitor-386-0.html It has increased by 389 since 9/10 !

By-product coal tar price today up again, by 23 to 3309.25 www.sci99.com/monitor-386-0.html
It has increased 350 per ton since 9/10 !

Press down for fund to come in. They want a piece of the pie also, and they want it cheap !

If Huaan sold the heavily traded coke future contract J1801 in sept at 2300 and recently buy back at 1800, then Huaan would have make profit of 500 per ton, add that to Q4 coke spot average, then Huaan Q4 effective coke average will be very impressive !

Good News is here !!

But first let us do a reality check. Based on 52steel site, Linyi city coke spot price ranged from 2250 (9/10) down to 1700 (17/11) (latest 6 prices were 1700). Hence the average price for 4Q until 17/11 is 1976. This is close to Huaan reported 2Q average coke price of 1968.

Based on (i) Q4 coke margin same as Q2 (ii) Q4 production increased 78% (annual from 900k ton to 1.6 mil ton) (iii) by-products higher selling price in Q3 and Q4, then Q4 earning to-date is estimated to be at least 2.5 sen !

But if we assume that for the rest of Q4, Linyi city coke spot price stay at 1700, then the picture is not so rosy as Q4 average coke price will become 1854. At this price, coke margin will be low, even negative. Even with help by the by-products higher selling price, earning will not be good.

So should this be a concern, if Linyi city coke spot price remain low at 1700 ? To me the answer is NO !! Read on for the justification.

To make sure 52steel spot price is accurate, I also used it to calculate Linyi city coke average price for Q2 (Apr, May, Jun). Surprisingly I get Q2 coke average 1774, but Huaan Q2 reported coke average is 1968, difference of almost 200 !!

It was really puzzling why Huaan Q2 coke average of 1968 was so much higher than Linyi city coke average price of 1774 (based on 52steel). Even if Linyi Yehua could sell coke at higher price than other Linyi coke producer, it can't be different as much as 200 !

Initially it had caused me to doubt the accuracy of 52steel data until one day I found the answer to the puzzle, and it is simply that Huaan HEDGE coke price at the coke futures !!

Huaan could have on early April 2017 sold coke May 2017 future contract (J1705) at 2000 and later bought back at 1850, hence made a profit of 150 per ton in the futures market.
(http://finance.sina.com.cn/futures/quotes/J1705.shtml <-- you need to select the 日K button to see the chart)
So by adding the profit earn in the future market of 150 per ton to the actual spot average of 1774, then Huaan effective coke average price is 1924, which is quite close to Huaan 2Q reported average. That was how Huaan Q2 reported average beat the Q2 spot average !!

Please refer to below links for understanding of commodity hedging:
https://www.investopedia.com/university/futures/futures2.asp
https://www.investopedia.com/university/futures/futures5.asp

As Huaan hedge in the futures, here come the BEAUTY part.
Knowing that coke spot rate will be depressed in Q4'17 and Q1'18 due to winter production control, Huaan most likely would have also hedged (sell) coke at high price in the futures and later bought back at lower price to earn the price difference.
Possible contracts are J1710, J1711, J1712, J1801 where futures prices exceed 2000.

Let us assume Huaan again make 150 per ton in the coke future in Q4.
If we use the example above whereby Linyi city coke spot price remain at 1700 for the rest of Q4, which resulted in poor Q4 coke average of 1874, BUT by adding the profit earn from the coke futures of 150 per ton, Huaan Q4 effective coke average is 2024, which is about same as Q3 coke average.
Then Q4 profit = 6 sen (i.e. 3 for Q3 profit + 0.78 x 3 for 78% vol increase + 0.7 for higher by-product selling price) !!

It may sound unbelievable, but TECHNICALLY it is ABSOLUTELY POSSIBLE !

I have not look into that yet. But as long as Linyi city coke spot price does not fall much much further, it is not a major concern, even though coking coal price is also important. You will know the reason why soon. Stay tune.

Don't be dismayed by Linyi city current low coke spot price of 1700. Good news is coming soon .........