India: Met coke market remains weak, buyers bargain for lower prices

Domestic met coke prices in the eastern belt of India have inched down marginally this week with buyers offering their coke (64% CSR, BF grade 25-90mm) from INR 42,000-43,000/t ex-Jajpur.

While there is cumulative inquiry for about 100,000 tonne of met coke in the spot market from Tata's NINL, SAIL's Rourkela Steel Plant (RSP) and IISCO, buyers are looking to purchase both imported and domestic met cokes to secure cost-competitive blends.

The imported met coke offers in India from China and Japan are heard from $420-440/t CFR India basis for 64% CSR BF grade coke. Even if 15% under-sizing issue is considered in case of Chinese met coke, the delivered price of imported met coke in eastern plants at present is estimated still cheaper against domestic met coke prices. This has made buyers to bargain hard with domestic met coke suppliers.

Volatile coking coal prices

The Australian coking coal prices retreated by $21/t towards the end of last week before rising by $8/t this week. The price for Australian premium grade coking coal is assessed at $259/t, FoB basis. However, the recent rise in coking coal prices is not because of any pick up in demand but due to disruptions in world's second largest coking coal miner, Teck Resources', Elkview operations in Canada.

The company reported a structural failure of a plant conveyor belt on 19 September at the mine which would impact its operations for up to two months while repairs are being carried out. The production loss expected in two months due to the outage is about 1.5 mnt.

What does Indian steel demand look like?

Although Indian steel demand from the auto and white goods sectors is expected to pick up during the upcoming festive season, the supply constraints of components has been hampering their production for almost a year. With China extending lockdown due to its zero-Covid strategy, the supply of components used in consumer durables is being disrupted, upsetting steel demand.

While India's passenger vehicle sales have risen by 8% in August 2022 against 2019 and by 21% against 2021 due to unprecedented demand, one of the lingering issues of chip shortage has not been completely resolved and is anticipated to continue till 2023, hampering its production and steel requirement from the sector.

Outlook

India's met coke prices are expected to drop to INR 40,000/t levels or even below if imported met coke prices go below $400/t levels. Also, if imported coking coal prices descend below $250/t FOB levels, domestic met coke prices may come down. Or else, these will remain range-bound at current levels, as per CoalMint's analysis.