Indian met coke prices, after falling for more than a month, recovered by INR 3,000-4,000/t this week. Price for the blast furnace (BF) grade met coke (25-90mm) were heard at INR 45,000/t on the east coast of India.
This price rise can be attributed to two reasons:
- Production cuts by coke producers amid higher cost of production; and
- Chinese coke offers have become less competitive.
Australian coking coal prices started their fall since June when buyers from India – its top importer — moved to the sidelines post-duty imposition on steel exports. In the last two months, Australian coking coal prices for the premium grade have fallen by more than $270/t and are currently being sold at $265/t CFR India basis.
However, Indian coke producers are offering coke in the market that is being manufactured using coking coal booked two months back at higher rates of $450-500/t. As a result, the cost of producing this coke works out to around INR 55,000-60,000/t. It usually takes 45-60 days for Australian coking coal to arrive to India from the time of booking, especially in case of spot trades.
“We are already selling coke at a loss of INR 15,000-20,000/t. Going beyond these levels are adding a huge burden on us. We have to cut our coke production by 30-40% amid high raw material costs and sluggish domestic demand,” said a coke seller based in Kolkata.
He further added that pig iron prices have also gained some strength, which supported the price rise. Steel grade pig iron prices in India have increased by INR 600/t in a week’s time and by INR 3,400/t m-o-m and is currently assessed at INR 47,700/t exw-Durgapur.
However, buyers are of the opinion that Indian coke producers are creating an artificial shortage by cutting production in order to increase their prices.
“With the news this week that the Indian government may remove the duty on steel exports, sentiments turned a bit positive and pig iron producers resumed their coke inquiries. Taking advantage of this, coke sellers raised their offers, citing limited availability of material”, informed a buyer based in the eastern region.
What’s happening in China?
Another factor that has provided support to domestic coke producers in India is the absence of cheaper Chinese coke, that had made its way to India in February, April and May this year.
Currently, Chinese coke offers for 62-64 CSR are being heard at $550/t CFR India (supramax vessel) which makes it around INR 45,000-46,000/t delivered to any eastern plant.
Also, although domestic coke prices are falling in China, no major downtrend is seen in their export offers due to their currency depreciation against the dollar. The Chinese yuan has depreciated by 8% since January 2022. Thus, if they lower their export offers, it would fetch them less revenues. Also, because coke production cost for them is still higher at $585-590/t, any significant fall in export offers is being restricted.
Outlook
In case, coke producers continue their production cuts, domestic coke prices will remain supported. Also, the steel market is expected to improve from August-end which may also support coke demand and prices in the first few weeks of August.
Leave a Reply