Indian domestic met coke prices have been largely stable over the past month at INR 38,000/t ex-Jajpur for 25-90mm blast furnace met coke. This is despite the surge in coking coal prices that have gone up by $65/t in one month to $314/t FOB Haypoint, Australia. Cheaper met coke offers from China are restricting Indian manufacturers from raising offers.
Indian steel mills have stocked up met coke in the last quarter of 2022 with China offering coke at a quite competitive rate of $385-390/t CFR India. Even now offers are up only marginally by $5-10/t. Despite the gradual removal of COVID-19 restrictions, China is still reeling under the pressure of rising cases affecting industrial output and steel demand.
In fact, the domestic coke prices in China have corrected by $30/t m-o-m at RMB 2,800/t ($410/t). Sellers are offering coke at the same competitive rates in the export market.
Indian steel demand scenario
Despite the y-o-y rise in domestic steel consumption, India’s steel demand remains somewhat affected due to the slowdown in export demand for finished goods. Weak sentiments are prevailing in industries such as mortgage, retail and high-tech in Europe and the United States. News of layoffs are rising, while clients are cutting IT spending and postponing long-term deals. These and other factors are impacting steel demand.
In the case of steel exports, post export duty removal in late November, Indian mills have slowly resumed bookings. In December, finished steel exports rose by 31% m-o-m to 442,000 t. Mills are heard to be exporting steel to countries like Vietnam, the Middle East and Italy at quite competitive rates against what suppliers such as Japan and South Korea are offering.
Why are coking coal prices on the rise?
Australian coking coal prices have risen by $65/t following the news of normalisation of bilateral trade relations with China. China has allowed three state-owned power firms and its top steel producer to import Australian coal. In fact, a top power utility has already placed orders.
However, steel demand in China remains sluggish. Also, there is not much improvement in coking coal demand from the global steel market indicating that the price rise is only sentiment driven.
Near-term outlook
As per CoalMint analysis, till cheaper Chinese met coke is available in the market, any major rise in Indian met coke prices seems unlikely despite the uptrend in imported coking coal prices. The hike in met coke prices is likely only when coking coal booked at higher rates start coming into India after a gap of a month or so and the cost of production for manufacturers rises significantly, forcing them to make some adjustments in order to maintain margins.
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