Chinese sellers are back to selling coke comparatively cheap leaving Indian sellers perplexed since the material was being offered at competitive rates till a few weeks back.
In two confirmed deals heard by CoalMint, a total of 65,000 tonnes of Chinese coke (64% CSR, BF grade, 25-90mm) have been booked at $580/t and $600/t, CFR India basis, for June laycan. The coke offers from China till last week were heard at $620-630/t CFR India, while a month back these were at around $650/t.
On the other hand, Indian coke (64% CSR, BF grade, 25-90mm) offers are currently assessed at INR 53,000-54,000/t ($684-696/t). But, in the latest bulk deal heard, 15,000 tonne of coke has been sold at INR 52,000/t ($671/t) in the eastern market.
Imported vs domestic coke prices
As per CoalMint analysis, buying premium grade coking coal from Australia at $545/t CFR India basis and then converting the same to coke results in a cost of around INR 68,000/t ($876/t) whereas buying cheaper Chinese coke at $580/t CFR India leads to a coke conversion cost of INR 54,500/t. The sharp difference in the cost makes Indian steel manufacturers lean towards buying imported coke from China.
Indian coke sellers react
With unexpectedly lower offers from China, Indian coke sellers are in a fix as the coking coal cost continues to remain high, resulting in high coke conversion cost, giving them less scope to drastically cut down their prices.
“In this uncertain market situation, we have to cut down our production capacity and bear huge losses. Also, amid high prices, domestic steel demand is not moving as expected while export demand is also slow, which is why there is no rush to book coke by the steel units,” said a coke seller based in Kolkata.
China’s domestic coke prices correct
China, which is slowly coming out of one-and-a-half months of lockdown restrictions, has huge coal and coke inventory build-up at plants amid sluggish domestic demand. According to market reports, sales of commercial houses in China’s 30 medium and large cities have come down by 54% y-o-y in April 2022. Property accounts for 30-35% of China’s total steel consumption.
Subsequently, domestic coke prices in China have already undergone two rounds of price cuts totalling RMB 400/t ($59/t) between 1-15 May and a third round of cuts is also being anticipated. The price for domestic coke (quasi-grade) in China is currently assessed at RMB 3,600/t ($503/t), ex-Shanxi.
What lies ahead?
Amid the lowered coke offers from China, Indian buyers are likely to book their near-term requirements via imports, thus leading to reduced inquiries for domestic coke in the merchant market. Indian coke producers have to ultimately bear the brunt of elevated coking coal costs and competitive offers from China resulting in capacities cut-down and losses in the near future.
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