Due to elevated global thermal coal prices since the beginning of this year, Indian cement manufacturers are preferring to procure pet coke owing to its competitive prices.
Although the current rates are over 90% higher on a y-o-y basis, higher cement production demand has been helping companies wither down the increased costs of production.
After registering negative-growth in FY’21, India’s cement output rose sharply by 20% y-o-y to 356 mnt in FY’22, CMIE data showed. Market participants, expect, production is likely to rise sharply next year on account of the government thrust for infrastructure.
Amid the ongoing geopolitical tension between Russia-Ukraine, keeping global thermal coal prices elevated, cement manufacturers are eyeing pet coke as a viable option.
As per CoalMint assessment, US-origin pet coke prices with 6.5% sulphur have eased to $248/t CFR from its peak of $266/t CFR India in March. Prices of Saudi-origin pet coke with 9% sulphur that are currently a more preferable option are at $245/t CFR, down by $14/t in March.
South African RB2 5500 (kcal/kg NAR) grade coal prices, on the other hand, are at $220/t FOB, while Australian (5500 kcal/kg NAR) at $208/t, FOB.
However, on per CV basis pet coke is cheaper against the imported thermal coal prices by around 20-22%.
Declining thermal coal imports
Owing to the ongoing coal supply shortage in the domestic market, cement manufacturers have largely focussed on imports, in a bid to ensure fuel security at plants.
Pet coke imports have risen by a whopping 85% y-o-y to 3.3 mnt so far this year (1 January-25 May 2022), as per CoalMint data.
Thermal coal imports by the cement sector, on the other hand, have declined by 61% y-o-y to 3 mnt, during this period, indicating the increase in pet coke consumption by the cement industry.
“There has been a strong demand for pet coke imports this year as strong cement sales have helped manufacturers to run their capacity utilisation levels at full. More space at stockyards is being taken up for maintaining higher production,” a reputed cement manufacturer said.
Procurement demand by the sector typically rise sharply ahead of the monsoon season as coal imported during the rainy season tends to add moisture.
Amid weak availability of Indian coal, cement players have been securing some supply from Coal India via linkages, while spot bookings remained nil. A few cement companies were also heard to be eyeing newer origin of pet coke as a few deals of Venezuelan pet coke were heard to be booked at $235/t CFR India basis.
Higher cement prices
Despite higher raw material prices, the cement industry has been able to transfer some cost to the consumers as cement prices had increased several times in the last few months.
As per industry reports, average cement rates across India have risen to its life-time high of INR 395 a bag in March amid elevated input costs, while production have topped over the pre-covid levels.
As per market participants, prices are likely to remain elevated as manufacturers will continue to pass on the rising costs to the customers.
Short-term outlook
With the rapid economic recovery and rural demand, cement demand is likely to gain strength. The boost is seen coming with the recent decline in steel prices following the government’s decision to reduce coking coal and met coke import duty, and hike in steel export duty.
This is seen supporting higher fuel imports by the cement sector. Pet coke prices, on the other hand, are likely to ease further as limited buying appetite of Chinese traders from the global market has pulled down thermal coal prices from its highs.
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