India: Bid-offers disparity weighs on domestic met coke trade

India's domestic met coke offers remained largely stable this week, despite cheaper Chinese offers as sellers have limited scope to cut their prices, informed market participants. Offers for BF grade (64% CSR, 25-90mm) met coke are assessed at INR 53,000-54,000/t in both eastern and western belts.

Buyers were bidding lower at INR 50,000/t, but even then no major deal was concluded this week.

Indian sellers prefer cutting output

Indian sellers are using costlier coking coal booked at $550/t CFR India in April for the production of met coke. The conversion cost of coal to coke at these rates comes at around INR 68,000-70,000/t (875-900/t). Coke sellers are already incurring losses of INR 13,000-15,000/t ($167-193/t) and anything beyond these levels could be a unbearable loss for them.

Hence, in order to survive the hard times, several coke producers are heard to have cut their capacities by 25-30%, whereas a few units are even heard to have shut their plants completely. It is also heard that one or two units are contemplating to restart their blast furnaces to avoid the risks of volatile coking coal prices as they can use the coke produced for captive consumption.

"The merchant requirement for coke has come down to just 50,000 tonnes per month in the east which was way above this volume till last year. We have no option but to cut down our capacities or completely shut shop," said coke sellers based in the east.

Buyers look for imports, will this continue?

Cheaper Chinese coke offers at $580-600/t CFR levels made Indian buyers indulge in more imports rather than float inquires in the domestic market.

Chinese coke producers had inventory build-up amid sluggish downstream demand there. This, coupled with reduced European demand for Chinese coke and purchase of cheaper Russian coking coal further made them offer coke at lower rates to India.

"It is like a window for us to buy cheaper coke from China to cover our requirements for the next 1-2 months. We are not sure if lower Chinese coke offers would be there next week also. The same opportunity had came in mid-February when China had announced steel production cuts due to the Winter Olympics, but after that, coke offers climbed drastically. So, buying only imported material is not our strategy, we are just making need-based purchases and not building inventory," informed an Indian steel manufacturer.

China is lifting lockdown restrictions from 1 June 2022 and it is expected that demand would go up, making Chinese sellers turn towards the domestic market. However, given the fact that the country is keeping its steel output within limits this year due to its annual steel production cut target, there will always be scope for coke sellers to offer material in the overseas market. Besides, cheaper Russian coking coal would support the cause.

What lies ahead?

Taking the above factors into consideration, it is going to be a tough time for Indian coke sellers as domestic steel demand from end-user segment is also expected to remain sluggish in the near term.