India’s coking coal imports during 1-15 May stood at 3.15 mnt, up by 24% against the same period last month (1-15 April), according to CoalMint data.
- Imports from Australia surged by 30% m-o-m in first half of May 2022.
- Imports from the United States rose by 17%.
- Mozambique recorded the highest rise of 200%.
This rise has come despite elevated coking coal prices as Indian steel units booked the raw material to ensure sufficient stock before the monsoon season. Amid volatile coking coal prices in recent months, Indian purchasers are stockpiling coal for the near-term.
Meanwhile, there were no Russian coking coal imports in the said period. Although there were talks in the market that India will set up a payment mechanism to import coking coal from Russia, nothing had been finalised, making Indian buyers to secure supplies from other-origins.
Despite sluggish domestic demand, Indian steelmakers gained a certain amount of profit from exports due to better realisations. However, this was before the export duty was announced by Indian government on steel exports late last week.
India is the only country whose crude steel production has grown by 6% y-o-y in Q1CY22 (January-March) to 32 mnt whereas all other key countries including China, Japan, South Korea has recorded a drop in the same.
Impact analysis of revised duties by Indian government
Amid elevated raw material costs, Indian government has announced its decision to remove import duty of 2.5% on coking coal imports. The actual cost saving for Indian steel producers at current coking coal price of $550/t CFR India (Australian-origin PHCC) stand at around INR 1,000/t ($13/t).
However, on the other hand, the government has increased its export duty on flat steel exports from existing 15% to 30%. This would result in curb in exports by Indian steel players. India’s flat steel exports in the first four months of 2022 (January-April) stood at 4 mnt, up by 13% y-o-y basis.
India’s coking coal buying would slow down
In addition to the disruption in steel exports that would impact India’s coking coal demand, there is increased competition from cheaper Chinese coke which is being offered at $600/t CFR India basis. This is making Indian buyers to import coke rather than coking coal. This is because the difference between the conversion cost of imported coking coal to coke and Chinese coke stands as high as around $195/t.
Thus, considering the above factors, it can be estimated that India’s coking coal buying would slow down in the upcoming months at least till monsoons, when domestic steel demand also takes a backseat.
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