Imported pet coke prices into India have corrected downward by 12% m-o-m in July. Price of the Saudi-origin material (9% sulphur) is currently assessed at $208/tonne (t) while the US-origin (6.5% sulphur) is at $219/t, CFR India. Prices have corrected by 11% against their highs in March 2022.
Why did prices decline?
1) A key reason for the price fall can be attributed to India cement-makers’ demand for Russian coal and Venezuelan pet coke, these being cheaper and also because of their low sulphur content. Russian high-CV 6000 NAR coal is currently being sold at $190/t while Venezuelan pet coke is at $206/t CFR India.
2) Another reason is that, Indian demand for pet coke has turned sluggish amid the ongoing monsoon season. During June-September, construction activities in India take a backseat, impacting cement demand, which subsequently translates into lesser demand for its raw material, pet coke.
Interestingly, the Indian cement sector, which had switched to thermal coal, especially from Australia, in H2 2020, since it was cheaper, is once again back to booking pet coke. This is because of the surge in thermal coal prices this year with the onset of the Russia-Ukraine conflict. While prices have seen a correction since March, they still remain elevated due to surging European demand amid sanctions on Russia.
Also, the US-origin 6900 NAR thermal coal, preferred by cement producers for many years for blending, is no longer available in plenty in the Indian market as the same is being diverted to Europe amid increased demand for the same from its power sector. According to customs data, India’s imports of thermal coal from the US have come down by 48% y-o-y to 4.12 million tonnes (mnt) during January-June, 2022.
India’s pet coke market scenario
India’s pet coke imports have risen by 300% y-o-y to 4.29 mnt in the first six months of the calendar year (January-June, 2022). Last year, construction activity was subdued due to the second wave of Covid. However, it is still much lower against the pre-Covid import levels of 7 mnt in H12019.
The Directorate-General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry allowed the import of pet coke for only select industries such as cement, lime kilns, calcium carbide, and gasification industries.
India’s pet coke production in May 2022 saw a marginal increase of 2% to 1.32 mnt. However it has surpassed pre-Covid production level of 1.15 mnt in May 2019. During January-May,2022, the same has gone up by 22% y-o-y.
Outlook
Cement companies have faced intense pressure of higher input costs for the past few quarters. Low domestic demand prevented manufacturers from raising cement prices in proportion to the rise in raw material prices. This exerted pressure on their operating margins. However, amid the ongoing monsoons, Indian pet coke demand may remain subdued and increased pressure from Russian coal and Venezuelan pet coke may also lead to further drop in pet coke prices in the near term.
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