Analysis of the impact of the Federal Reserve's interest rate cuts on coke and related industries

From the perspective of market sentiment and capital flow,the Fed's interest rate cuts have caused a change in the risk appetite of global investors.After interest rate cuts,the risk-free interest rate returns decrease,and market funds tend to flow into risky assets,which is evident in the futures market.For example,futures products such as iron ore priced in US dollars may experience price increases in the short term,which in turn may drive up the prices of all black series products,and coke futures prices may also be affected.

On September 17,2024,the Federal Reserve announced a 50 basis point interest rate cut,and the main contract for rebar rose on the same day.Within the following week,due to the release of other domestic policies,rebar futures rose by over 700 yuan/ton,and coke prices also fluctuated along with market sentiment and industry chain price transmission.

In terms of the upstream and downstream relationship of the industrial chain,the steel industry is the largest downstream demand end for coke,and the two are closely connected.The Fed's interest rate cuts often indicate the beginning of economic stimulus,which will boost demand in the construction and manufacturing industries.

In the construction industry,the cost of mortgage loans has decreased due to interest rate cuts,stimulating the real estate market.The number of housing construction projects has increased,leading to an increase in demand for construction steel such as rebar and wire rods.The automobile manufacturing industry is also similar,as consumer car loan costs have decreased,car consumption has been stimulated,and demand for automotive steel has increased.

The growth in steel demand directly drives the demand for coke,as approximately 0.4-0.6 tons of coke are consumed to produce 1 ton of molten iron.So,from the perspective of industry chain transmission,the Federal Reserve's interest rate cuts indirectly have a positive impact on coke demand by stimulating steel demand.

In terms of cost and price,key raw materials for steel and coke production such as iron ore and coking coal are mostly priced in US dollars in the international market.The Federal Reserve's interest rate cuts have led to a depreciation of the US dollar,increasing the cost of purchasing these materials in other currencies.For coke enterprises,as the cost of coking coal increases,if steel enterprises cannot fully transfer costs downstream due to market competition,the profit margin of coke enterprises may be compressed.But if the demand in the steel market is strong and the increase in steel prices can cover the cost increase,coke enterprises can alleviate cost pressure by raising coke prices.For example,in certain interest rate cutting cycles,when the price of coking coal rises,coke enterprises,after weighing the demand in the steel market,appropriately raise the price of coking coal to maintain their own profits.

At the international trade level,after the interest rate cut of the US dollar,the currencies of emerging market countries have relatively appreciated,and the import costs of some emerging market countries that rely on imported steel and coke have decreased,which may increase the import volume.This will affect the global trade pattern of steel and coke,and for domestic steel and coke companies in the United States,they may face more intense import competition.For export-oriented coke enterprises,if the currency of the country where they are located depreciates relatively due to the US dollar interest rate cut,theoretically their products will enhance their price competitiveness in the international market,which is beneficial for exports.However,in reality,factors such as trade policies and international market supply and demand need to be considered.

Although the Federal Reserve's interest rate cuts are not directly targeted at the coke industry,they have multidimensional impacts on the coke industry by affecting macroeconomic environment,steel industry demand,raw material costs,and international trade.