With the rise in global thermal coal prices in the recent weeks, Indian cement manufacturers have shifted back to using pet coke due to its competitive prices.
Over the last two months, US-origin pet coke prices have sharply declined by $100/tonne (t) from its historic highs of $260/t in Oct’21, CFR India. On the other hand, various-origin thermal coal prices have risen to the same levels of $160-180/t, CFR India basis as seen in Oct’21, after seeing a short-term correction in Nov-Dec’21.
At present, prices of imported pet coke and thermal coal may seem to be on par with each other. However, there is a notable difference in per calorific value (CV) costs of both the fuels.
Change in buying trend and cost analysis
After the Chinese ban on Australian coal imports in the latter half of 2020, Australian coal prices fell sharply. Indian cement buyers took the advantage of the reduced costs and increased availability of Australian coal and raised their imports in CY’21.
However, in Oct’21, thermal coal as well as pet coke prices had touched their record highs amidst supply disruptions and increased winter demand.
This made Indian cement manufacturers to switch to thermal coal as it was cheaper over imported and domestic pet coke by 14% on per CV basis.
Now, 2022 started on a sour note with the Indonesian government imposing a ban on coal exports, while supplies from Australia, the US and South Africa also saw disruptions due to bad weather and logistics issues. Subsequently, thermal coal prices surged once again.
This was in contrast to domestic pet coke prices which saw a correction this month by an average of INR 3,000-3,500/t ($40-47/t) across refineries while imported pet coke prices came down by $10/t m-o-m.
The fall in prices came against the backdrop of improving supply situation in major pet coke supplying countries like Saudi Arabia and the US. In case of domestic pet coke, the refineries experienced an inventory build-up as no major bookings took place in Q4CY’21 due to escalated prices.
The price disparity between pet coke and thermal coal currently stands at 19%, as per CV Pet coke prices are at INR 1.94/t while thermal coal prices from Australia, the US, and South Africa stand at an average of INR 2.2-2.4/t, as per CoalMint analysis.
In addition, Indian refineries including IOCL and RIL have also been offering lucrative discounts to attract the cement companies.
Short-term outlook
Cement demand is slowly recovering in the Indian marrket as construction activities generally picks up the pace during Jan-Jun before the rains, further boosting pet coke demand. Imported pet coke prices may also see an upward movement in the next few weeks, in line with the recent surge in thermal coal prices. However, the rise would be limited amidst improved supplies.
Domestic pet coke prices, on the other hand, is likely to remain under pressure amidst inventory clearance pressure before the end of FY’22. Further amid the expectation of a rise in thermal coal prices, cement manufacturers are likely stick to pet coke in near-term.
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