China, a key met coke exporter to India, reduced its exports to the country from Oct’21 amid domestic coal shortage and subsequent cutbacks in coke production.
However, Chinese met coke offers resurfaced in the Indian market after four months of hiatus in Feb’22 and that too much cheaper.
This has come against the backdrop of coke inventory build-up in China amid steel production cuts. The country’s government has ordered steel output curbs of 30-40% in key provinces in order to control emissions and have clearer skies during the Winter Olympics (4-20 Feb’22).
Furthermore, the import duty on Chinese met coke into India, which stood at $25/t, expired in Nov’21, boosting exports from China.
“With lowered domestic coke demand — first, due to the Spring Festival, and later due to the Winter Olympics, there has been a huge coke stock pile-up with Chinese producers in the last one month. As a result, they are offering the same again in the export market,” said a market participant based in China.
A few days back, an Indian steel manufacturer booked one Chinese met coke cargo (BF grade 65% CSR) for March arrival at $550/t, CFR India, equivalent to INR 41,000/t (excluding import duty and inland freight). The recent offers for the same were heard at a lowered rate of $485/t, (INR 36,160/t) on FOB basis.
Does Chinese material pose a threat to domestic producers?
While it was being anticipated that cheaper imported coke offers may put pressure on domestic coke prices in India, the same did not happen. Domestic met coke offers (BF grade, 64% CSR) in India continue to remain largely stable since the past three weeks at INR 51,000/t in the eastern region and INR 50,000/t in the western part, as per CoalMint’s latest assessment.
This stability in domestic coke prices is because of elevated coking coal prices from Australia. The reasons are:
- Supply constraints from Australia due to rains;
- Strong demand from India, Japan and South Korea; and
- Escalated tensions between Russia and Ukraine raising chances of sanctions on Russia by US and EU nations.
“We have reduced our met coke plant utilisation levels, but won’t be able to lower current rates given the fact that selling below the same is completely unviable for us,” said a met coke producer based in Kolkata.
He further added that Chinese met coke producers have an “undersize” issue. Only those who want bulk quantities would be allowed to book the imported material. “Given the Indian demand scenario and uncertainty in the global markets, steel units are purchasing coke in smaller quantities from the domestic market. That is why the Chinese material is not a threat for us,” said the producer.
Near-term outlook
Post-Winter Olympics, steel units in China have resumed operations and coke demand is picking up there. Once the excess stock is cleared up, domestic coke prices in China may gain some strength and so will export offers. Also, with strong chances of Russia facing sanctions, coking coal imports by China from Russia may take a hit and the former would have to meet its domestic coking coal and coke requirements from the domestic market, creating supply issues.
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