India: Domestic met coke prices lowered amid weakening coking coal, pig iron

Indian domestic metallurgical (met) coke prices have fallen further this week in line with the sharp decline of seaborne coking coal prices alongside continued weakness in pig iron demand.

At present, India-originated met coke prices remain pressurized from subdued demand in the domestic market as well as from the overseas export market, resulting from falling coke imports in China.

Notably, Chinese met coke prices have undergone eight rounds of consistent declines, totaling RMB 1,500/t ($235/t), since the beginning of Nov'21.

India's merchant met coke producers are broadly aligned with the bearish sentiments across the value chain in the overall downstream steel market.

The recent downfall in demand for met coke has been aggravated as a couple of large-scale pig iron plants have been reportedly idled due to low margins and subdued steel demand.

Hence, coke makers are reducing their offer prices to entice buying interest in a relatively softer market wherein pig iron producers are reluctant to accept high-priced met coke.

Currently, prices for the 25-90 mm blast furnace (BF) grade met coke are assessed at INR 44,000/tonne (t) exy-Cuttack and INR 45,000/t exy-Surat, both down by INR 1,000/t on a w-o-w basis. These prices are exclusive of GST @5%.

Australian coking prices plunge by 15% w-o-w

Indian merchant met coke producers are supported to a certain extent by the sharp decline in seaborne coking coal prices. Coke makers in India are primarily dependant on Australia for sourcing the coking coal required for coke production.

Australian premium low-volatile hard coking coal prices decreased by 15% this week, to $337/t CNF India, primarily following a deal concluded at $320/t FOB for 75,000 t of Australian Peak Downs North branded premium mid-volatile coking coal with late-Dec laycan.

Meanwhile, however, Australian coking coal supplies remain tight as heavy rainfall has soaked much of the Queensland basin, Australia's major coking coal producing hub. More rainfall is predicted during the ongoing wet season.

Weakness in pig iron prices impacting met coke

Indian domestic met coke prices in the merchant market are facing downward pressure because the country's pig iron prices have been on a declining trajectory.

Falling steel prices and ample material availability in the spot market are key factors driving the downward price corrections for pig iron.

To further illustrate this point, Vedanta Resources, one of India's leading pig iron manufacturers, has reduced prices by INR 1,000/t ($14/t) this month.

Similarly, Tata Metaliks and Neo Metaliks have reduced their pig iron prices this month by INR 1,800 ($24/t) and INR 500/t ($7/t) citing weak demand, as per trade sources.

Another clear indication can be drawn from the recently held pig iron auction by SAIL, India's largest hot metal producer, wherein bid prices fell to a five-month low.

Outlook

Indian merchant met coke manufacturers have lately been able to curtail their offer prices because of falling prices of coking coal imported from Australia.

However, near-term prices of Australian coking coal may stabilize amid potential supply concerns due to rainfall-induced weather disruptions in Queensland, Australia. This would likely prevent any significant downward price revision by Indian met coke producers.