India: Domestic met coke market turns quiet, competitive offers from China pose threat

The Indian met coke market has turned quiet since the past few weeks with offers remaining rangebound at INR 42,000-42,500/t in the eastern belt and at INR 41,500-42,000/t in the west for BF grade (25-90mm) coke.

Meanwhile, there was a demand void in the merchant market before the Diwali festival, after which no trades have been heard so far. The key factors contributing to the same are:

Increased offers of cheaper Chinese coke

China is already dealing with sluggish domestic steel demand since the last six months amid its property crisis and slow industrial activity due to strict Covid-19 restrictions, thus impacting met coke demand. Moreover, Chinese coke manufacturers have cut down production and are operating at 50-60% capacity, which is still in excess compared to demand, compelling them to offer coke for exports, especially to India.

The majority of Chinese coke offers are being heard in the range of $430-440/t, but a few suppliers are even offering at $410/t CFR India (as a part of desperate sale). Subsequently, the price of Chinese coke would come to around INR 39,000-40,000/t (on delivered to plant basis in eastern India). India imported about 0.47 mnt of met coke in October, up 60% m-o-m.

Import pressure on domestic steel market

Indian steel mills are also facing the increased presence of cheaper imported material like pig iron, billets, scrap, and HRC from countries like China, Japan, Vietnam and Indonesia. This is also negatively impacting the country's domestic steel demand and subsequently met coke requirement in the merchant market.

The domestic price for HRC (2.5-8mm, IS2062) is currently assessed at INR 56,100/t exy-Mumbai, whereas imported offers are at $600/t CNF India (INR 50,000/t).

In the case of pig iron (steel grade), although domestic prices have come down to INR 42,000/t exw-Durgapur, offers for the same from Vietnam and Russia are heard at $450-475/t CNF India (INR 37,000-39,000/t).

With the export duty on Indian steel and sluggish global steel demand, especially in Europe, met coke demand has been adversely impacted.

Australian coking coal prices on the rise

The problem for Indian met coke producers is that despite bearish sentiments, they are unable to cut down on their costs, given high raw material costs. Australia is witnessing heavy rains and thus the price for their premium grade coking coal have gone up by 48% in the last three months and are currently assessed at $330/t CFR India.

While the cost of met coke production at current coking coal price levels is around INR 43,000-43,500/t, any further decline in their existing met coke offers will add to their losses.

What lies ahead?

Met coke prices in India are likely to face increased pressure from cheaper Chinese coke in the coming days. However, the fear of huge losses and poor margins may restrict any decline (below INR 40,000/t levels) in prices.