Domestic met coke prices (64% CSR, BF grade) in India have come down from their highs of INR 61,000/tonne (t) in March this year to INR 46,000-47,000/t levels in the eastern market.
The coke price trend explained
However, if we look at the trend, it took almost two months for domestic coke prices to fall by INR 6,000-7,000/t and only 20 days to fall by another INR 7,000-8,000/t post-Indian government’s decision to impose export duty on steel in the third week of May.
With Indian steel export offers becoming uncompetitive in the export market and India’s domestic steel demand being already sluggish, demand for coke in the merchant market has been adversely affected, making sellers lower their offers.
Another factor that has contributed to the same is the drastic fall in Australian coking coal prices in the last three weeks in the absence of Indian interest. Coking coal has come down by $145/t and is currently trending at $380/t, FOB Haypoint, Australia for the premium grade.
What is preventing major fall in coke prices?
However, given the plunge in coking coal prices, domestic coke prices should have seen a more dramatic fall. But this did not happen as the conversion cost of coal to coke remains high with coking coal being booked at higher rates.
The coke currently being offered in the domestic market is made from coking coal booked at an average of $500-520/t CFR India whose conversion cost stands at around INR 64,000-65,000/t. This means that the coke sellers, forced to lower their prices, are already selling in the domestic market at a substantial loss.
“We are already selling coke at lowered rates. Even if we take today’s rate of coking coal at $410/t, CFR India, its conversion cost would come to around INR 52,000-53,000/t which is still higher than our current offers of INR 47,000/t. This means that although the spread between conversion cost and selling price has come down, there is still a gap where we are incurring losses,” informed a reputed coke producer based in Kolkata.
Chinese offers turn scant
India saw quite reasonable Chinese coke offers in the last two weeks of May but which have turned scant since the start of June with the easing of lockdown restrictions in that country.
While 64% CSR BF-grade Chinese coke had been booked at a price as low as $575/t, CFR India in May last week, there are no offers to India as on date. But price indications for the same remain at $630/t, CFR basis. In fact China’s domestic coke prices have seen a hike of RMB 300/t ($45/t) since the start of June in a few provinces.
This is also providing some support to India’s domestic coke prices and has helped the sellers to maintain above INR 45,000/t levels, informed participants.
What lies ahead?
Given the higher cost of production, domestic coke prices are likely to stabilise at levels of INR 45,000-47,000/t in the near term. A further fall in prices is only possible if imported coking coal prices fall below the $350/t-mark.
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