*Indian buyers opt for cheaper Chinese imports
*Chinese mills ramp up exports as steel demand falls
*China’s exports may fall in H2 as global met coal prices drop sharply
India became the most preferred destination for Chinese coke exports in H1CY22 (January-June 2022). As per customs data, the country exported 650,000 tonnes (t) of met coke to India in H1. Exports to India fetched China an average income of $553/t.
The rise in exports to India can be attributed to several factors. The most prominent are mentioned below:
- Sluggish domestic demand in China
- Surge in Australian coking coal prices
- No anti-dumping duty on Chinese coke
- India’s increased crude steel production
Tepid Chinese steel demand: Sluggish steel demand in China due to Winter Olympics had led to curtailment of production in the country’s polluting steel-production units. Also, the resurgence of COVID-19 cases in China since March resulted in slowdown in industrial activities, impacting steel demand from end-user segment.
Rise in Australian coking coal prices: Australian coking coal prices remained elevated since the start of the year due to heavy rains resulting in supply constraints. Moreover, the Russia-Ukraine conflict fuelled coking coal prices to new highs of $650/t FOB. This forced Indian steel mills to opt for cheaper met coke imports, as the conversion cost of coking coal to coke was higher than Chinese coke imports.
No ADD on Chinese coke: In addition, the anti-dumping duty (ADD) of $25/t that was imposed by Indian government on Chinese met coke imports in 2016 for five years was annulled in November 2021. This made Chinese coke quite competitive against other-origin coke such as from Poland and Colombia. Also, India used to import coke from Japan till 2020. But last year Japan became a net importer of met coke thereby increasing the scope of Chinese coke imports into India.
Increase in crude steel production: India’s crude steel production in H1CY22 rose to around 62.9 mnt, as per SteelMint data. Last year around the same time, India was tackling the second wave of COVID that had impacted industrial activities and steel demand. This year, increase in steel production led to an exponential rise in demand for raw materials, resulting in higher met coke imports.
Japan second-largest importer
If we look at China’s overall met coke exports, volumes rose by 21% y-o-y in January-June 2022 while realisations rose by 80% y-o-y to $490/t.
After India, Japan was the next top export destination at 600,000 t, with the realisation price at $470/t. In fact, Japan turned out to be a net importer of met coke this year as the major met coke producer and supplier, Nippon Steel, temporarily suspended some of its coke ovens at the Kimitsu plant for two years leading to shortage in the domestic market. This led steelmakers to increase their reliance on imports.
Brazil was the third largest importer of Chinese coke at 590,000 t at an average export realisation price of $581/t.
What lies ahead?
China’s met coke exports in H2 may decline as global coking coal prices have fallen substantially. Australian coking coal prices have fallen by 60% since March.
In addition, Indian steel demand has turned sluggish post the implementation of export duty on steel in the last week of May. Thus, a subdued Indian steel demand outlook is likely to weigh on met coke requirements.
“Given the current scenario where Australian coking coal prices have plunged, buying coal and converting it into coke is the preferred option, until Chinese coke prices fall and there is a wide gap between the two. In fact, given the ongoing situation of steady domestic demand and fall in Australian coal prices, it’s an opportunity for Indian coke producers to export like last year,” said a coke producer based in Kolkata.
Global steel demand is expected to slow down in H2 amid inflationary pressure and supply chain woes post Russia-Ukraine conflict, negatively impacting met coke exports.
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