A week into Russia’s invasion of Ukraine, the global coal market saw many historic firsts with Australian-origin coking coal prices touching an all-time high of $475/t FOB. The surge in imported coal prices has a direct impact on the domestic met coke market, with offers rising by INR 4,000/t w-o-w.
Current offers for 64% CSR met coke are heard at INR 55,000-56,000/t ex-yard basis in both eastern and western India. However, the rise in offers is not going down well with the buyers and trades have come to a standstill.
According to market participants, buying decisions in current times of volatility and uncertainty have become very risky and buyers are preferring to wait and watch.
“There are enquires in the market but for small quantities of 5,000-8,000 t, buyers are skeptical of making purchases for bulk quantities as the situation may change in a day with rise in prices of coking coal being quite unreasonable”, quoted a met coke seller based in eastern India.
Many merchant coke producers in the eastern region have cut their utilization levels to 50% and even below that amid unavoidability and tepid demand at such high price levels.
Pig iron prices rise sharply
Domestic basic pig iron prices have risen to INR 53,500/t ex-Durgapur whereas foundry grade prices are up by INR 4,500/t at INR 54,500/t ex-Durgapur. The rise in flat steel prices have been comparatively low at INR 2,400/t w-o-w in the spot market as HRC prices are currently assessed at INR 68,400/t ex-Mumbai, excluding 18% GST.
The rise in prices is mainly because of a sharp surge in raw material prices with no substantial change in demand. In fact, market participants are of the opinion that it is difficult to pass on the rise in raw material prices to end-products and ultimately steel demand would turn sluggish once again amid escalated prices.
Coke import offers from China wane
During the Winter Olympics in Feb when there were steel production cuts in China and coke demand had turned sluggish, Chinese sellers opted to sell their stocks in the export market, including India, at comparatively cheaper rates of $550/t CFR as against domestic coke prices of INR 51,000/t ($680/t).
However, the situation changed post Olympics when Chinese mills resumed production resulting in increased demand for domestic coke.
In addition, amid the Ukraine-Russia conflict and subsequent sanctions on Russia by western and Southeast Asian countries, coking coal supplies from Russia to China have been hampered, domestic coking coal demand and prices have risen and Chinese met coke producers have raised domestic coke prices by RMB 400/t ($63/t) in two rounds of price hikes.
Coke producers are focusing on meeting domestic demand and have reduced export offerings.
Outlook
In the current scenario, chances for correction in global coking coal prices seem unlikely. Even if the war comes to an end, prices may not come down in the near future as sanctions on Russia would remain in place.
Thus, met coke buyers in India would have no option but to accept the rise in offers. The ultimate impact of high prices would be majorly seen on the independent coke units as they would either reduce utilization levels or close down their units.
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