The surge in raw material prices has emerged as a major concern for cement manufacturers in India. Due to the ceaseless rise in pet coke and thermal coal prices, cement prices in the country have increased by 25% in the past year.
Surging pet coke prices
There has been a substantial increase in the India-delivered prices of seaborne petroleum coke in the past one year (up 140% y-o-y) in line with surging crude oil prices (pet coke is a byproduct at oil refineries) and supply disruptions, mainly due to cyclones and power outages.
The current price of US-origin pet coke with 6.5% sulphur content is assessed at $230-231/t CNF India as against $185-186/t a month back, an increase of $44-45/t over the past one month.
Offers for pet coke, with 9% sulphur content, from Saudi Arabia are presently assessed at around $240-241/t CNF India, higher by $65-66/t compared with $174-175/t prevailing in the beginning of Oct’21.
The FOB prices of US Gulf Coast (USGC) pet coke with 6% sulphur, widely accepted as the reference across international markets, have also inched up to $148-150/t.
Domestic prices of pet coke across major refineries in India have also been on an upswing over the last one year in tandem with global prices.
Major refineries such as RIL, Nayara Energy (erstwhile Essar Oil), Bharat Petroleum, and MRPL have increased prices by more than INR 4,000/t on a month-on-month basis and by INR 11,900/t, y-o-y.
| Company | Nov’20 (In INR/t) | Oct’21 (In INR/t) | Nov’21 (in INR/t) | Y-o-Y Difference in % | M-o-M difference |
| RIL exw-Jamnagar, Gujarat | 8,851 | 16,360 | 20,781 | +135 | +27 |
| Nayara Energy ex-Vadinar, Gujarat | 8,875 | 16,393 | 20,814 | +135 | +27 |
| Bharat Petroleum, Bina refinery in Madhya Pradesh | 9,861 | 15,946 | 20,434 | +107 | +28 |
| MRPL | 8,250 | 13,140 | 15,910 | +93 | +21 |
Cheaper thermal coal in demand
Amidst the sharp rise in pet coke prices, several cement companies shifted to thermal coal procurement in the past one year. Some cement companies have booked Australian coal cargoes that were rejected by Chinese customs this year, as per reports available with CoalMint.
“The landed cost of thermal coal on per CV basis is cheaper by 25-30% compared to pet coke these days… Though small quantities of pet coke are still arriving from Saudi Arabia as a result of long-term contracts,” a Delhi-based cement consultant informed.
As per CoalMint data, coal imports by cement companies rose to 13 million tonnes (mn t) in Jan-Oct’21, a whopping 112% higher y-o-y.
Imports in Oct stood at 1.2 mn t, up 30% m-o-m. The sharp rise in thermal coal demand by cement manufacturers last month came in the wake of the decline in global prices after the Chinese government stepped in to stabilise rising domestic coal prices and improve supplies.
Procurement of Australian and South African thermal coal cargoes were the highest among cement companies, informed market participants.
Interestingly, at present, a bid-offer mismatch for Australian coal cargoes has compelled some cement units to increase procurement from South Africa as prices are more competitive.
Offers for Australian coal for Dec delivery were assessed at $108/t, while bids were lower at $90/t on FOB Newcastle basis. South African RB2 (5500 NAR) grade coal prices have declined to $105/t, a decrease of 42% from the mid-Oct peak of $190/t.
Short-term outlook
CoalMint believes that domestic cement manufacturers are likely to continue booking thermal coal in the coming months because of the limited scope of correction in pet coke prices in the short term.
However, owing to higher thermal coal prices this year over pre-pandemic levels, cement manufacturers would have little option but to pass the cost burden on to end-users.
The only support for the Indian cement sector is likely to be in the form of rising domestic coal supplies, with production being ramped up at a significant pace.
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