Indian pig iron prices have been rising for the past 7-10 days. After falling to a low of INR 37,900/tonne (t) on 9 Sept’21, steel grade pig iron prices started heading north and are currently resting at INR 42,100/t exw Durgapur levels. Steel Authority of India’s (SAIL’s) bid prices also rose by INR 2,000/t at its latest Bhilai pig iron auctions, where the average weighted price was at INR 40,150/t exw.
Reasons for pig iron price hike?
- Met coke prices: Coke prices have increased substantially, mainly due to shortage of the material in the domestic market and rising coking coal prices. Till last week, Indian met coke prices for the 25-90 mm, blast furnace-origin category were in the range of INR 43,000-44,000/t. However, in the eastern region, prices have jumped 11% w-o-w to INR 49,000/t. On the west coast, prices of the same grade have gone up w-o-w 8% from INR 41,500/t to INR 45,000/t.
Two factors are driving up domestic met coke prices. One is that Australian and US coking coal prices are shooting up. So, obviously, with raw material prices rising, met coke selling prices are surging too.
- Coking coal prices: The average monthly import prices of the benchmark Australian HCC have climbed 46% m-o-m to $420/t in Sept’21 compared to $287/t in Aug’21. Similarly, the average monthly HCC 64 Mid-Vol price has gained 43% m-o-m to $364/t in Sept’21 against $255/t in the previous month.
- China factor: International coke prices are very high at present because of China’s excessive consumption. The country is importing heavily amid reduced production. Since it is unable to import coking coal from Australia because of the unofficial ban it had slapped on this country in Oct’20, or even from Mongolia because of Covid-related issues, it has focused on sourcing from the US, Canada, Russia. These exporters are benefiting since Chinese landed costs of coking coal are much higher than the landed costs of met coke in India, a factor that is pushing up global met coke prices. An indicator is that average monthly import prices of the 64% CSR met coke into India have spurted to $576/t CNF in Sept’21 against $498/t CNF in Aug’21, up 16% m-o-m.
- Indian coke export demand: There is overseas demand for Indian met coke. Domestic pig iron prices have risen but not in sync with coke prices, which is luring domestic met coke producers to explore the more lucrative export market. Data collated from Customs show that Indian met coke shipments have trebled from 55,000 t in Jul’21 to 0.20 million tonnes (mn t) in Aug’21 and 0.10 mn t till date, in Sept’21.
“There is a shortage of met coke in the domestic market since producers are keener on exports rather than supplying in the domestic market since overseas sales are fetching better margins,” said a source.
“The lower cost of iron ore is not offsetting the cost of pig iron production, which has spurted sharply, because of rising met coke prices,” said another source.
Outlook
Some mills are holding back from offering pig iron and mulling over reducing production amid limited Met coke supplies and steep prices. Such a scenario may increase the demand for substitutes like calcined petroleum coke. Coke is used primarily to smelt iron ore, acting as a source of heat as well as chemical reducing agent.
Leave a Reply