India’s decision to impose export duty on steel in the last week of May has started to show its adverse impact, as demand for the key steelmaking ingredient, coking coal, is on the wane.
As per CoalMint vessel data, the volume of coking coal arriving into India between 1-23 July stands at 2.82 mnt, a drop of 30% compared to imports in the same period last month. The decline in imports from top exporter, Australia, is about 29% m-o-m at 1.90 mnt, while imports from the USA fell 18% m-o-m to 480,000 t.
It usually takes 40-60 days for coking coal vessels booked from Australia or the USA to arrive at Indian ports (including loading, domestic transportation and voyage time). This implies that Indian buyers had taken a backseat in June for booking Australian coal, while the decline in US coal imports started in May amid falling global coking coal prices, as mills desisted from taking long-term positions in a volatile market.
Interestingly, coking coal imports from Russia have fallen by just 8% to 160,000 t, not a significant drop at all vis-a-vis other origins, as Russian coal is being sold at discounted rates compared to Australian and US cargoes.
Steel exports drop sharply in June
Exports of finished steel from India more than halved in June on an annualised basis and by 19% m-o-m following the levy of a 15% duty on steel exports by the government in an effort to increase domestic supplies and curb inflation. Indian steelmakers exported 640,000 t of the alloy last month compared to 1.37 mnt in the corresponding period last year.
In fact, the country’s crude steel production fell by 1.3% m-o-m in June, while finished steel production fell by 2.2% m-o-m to 9.71 mnt, as per JPC’s provisional data.
Coking coal port stocks swell
India’s coking coal stocks at ports rose by 13% m-o-m to 5 mnt in the first week of July, while coking coal stocks were assessed at around 4 mnt in the first week of June. The rise in stocks can also be attributed to production cuts of 15-20% announced by Indian steel majors amid poor export and domestic demand.
Outlook
With Indian steel demand anticipated to remain sluggish at least during monsoon months till mid-September, Indian coking coal imports may remain subdued. Any rise seems likely only when domestic steel demand picks up during festive season from Oct-Dec’22.
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