The Indian government’s recent removal of the import duties of 2.5% and 5% on coking coal and met coke respectively has got the domestic met coke sector further worried.
Domestic met coke producers, who were already reeling under cheaper Chinese offers and sluggish domestic demand, became more concerned, which forced them to lower their domestic offers.
It may be mentioned the Indian government recently imposed export duties on steel raw materials and intermediaries in a bid to reign in domestic steel prices that have rallied by more than 100% since March 2020 levels.
Even if the import duties of 2.5% and 5% on coking coal and met coke have been removed, a 15% export duty has been imposed on nine classes of iron ore and steel intermediates. This includes flat-rolled products of iron or non-alloy steel. A 45% duty has been slapped on iron ore pellets.
Meanwhile, the offers for blast furnace (BF)- grade coke (64% CSR, 25-90mm) are currently heard at INR 50,000/t in the eastern region of India, down by INR 2,000-3,000/t w-o-w. However, western region sellers have adopted a wait-and-watch mode.
Subdued demand – real cause for concern
With the Australian premium coking coal currently at $505/t CFR India, removal of the 2.5% import duty would result in savings of INR 1,000 per tonne ($13/t).
But introduction of the 15% duty on exports of steel intermediaries would make them costlier in the overseas market, hampering exports. In fact, HRC export offers from India have come down by $244/t from their highs in March 2022 and are currently assessed at $821/t, FOB east coast. These are expected to fall further in the upcoming weeks.
India exported about 13 million tonnes (mnt) of steel intermediaries last year against its consumption of 98 mnt. Now, with the duty imposition, Indian sellers have withdrawn their offers from the export market, a scenario which is likely to increase selling pressure on an already slowed-down domestic market.
“There were no bids for coke in the merchant market as steel mills have adopted a wait-and-watch mode. Domestic end-user demand in India has already slowed since the past few weeks as steel purchases were reduced, on grounds of unaffordability. With this duty, key buyers have further moved to the sidelines in anticipation of more drop in steel prices,which is ultimately affecting coke demand,” said a coke seller based in the eastern region.
Import offers from China dry up this week
Indian coke producers faced increased competition from cheaper Chinese coke in the last two weeks, that were offered at $580-600/t CFR India. This made Indian steel producers book Chinese coke in substantial quantities, in the process, stocking up on their requirements for the upcoming 1-1.5 months.
However, this week, there were no coke offers from China as they focused on the domestic market with easing of lockdown restrictions there. Domestic steel demand in China has not picked up yet but it is being anticipated that starting June, it may go up, making coke sellers wait and watch.
Outlook
As per CoalMint’s analysis, whenever a new policy comes up, the market takes time to adjust to the new dynamics. Also, the monsoon is round the corner when steel demand, especially from the construction sector, takes a hit. Thus, taking into account these factors, it can be inferred that domestic coke prices would remain under pressure for the next few weeks.
Leave a Reply