India: Domestic met coke under pressure on lower import prices

Domestic met coke prices in India remained stable w-o-w. Current prices fell by INR 2,000/t w-o-w to INR 53,000/t on the eastern region, while the same saw an increase of INR 1,000/t to INR 48,000/t on the west coast, as per CoalMint's latest Assessment.

However, importantly, despite being stable, prices are under pressure due to the factors listed below:

Lower imported prices

Recently, an imported met coke deal for 65% CSR was heard to be concluded by a major Indian steel mill at a much lower level of $560/t CIF India, equivalent to INR 42,300/t (excluding import duty and inland freight).

In addition, due to the Winter Olympics in China, met coke demand in the country has decreased and so crude steel production has been curtailed by 30-40%.Hence, producers are looking for exports even at lower prices to liquidate their inventory.

Furthermore, the import duty on Chinese met coke into India, which stood at $25/t, expired in Nov'21, boosting exports from China.

Coking coal prices continue rising

Australian coking coal prices continued rising mainly amidst supply constraints due to bad weather in the country which affected operations in the key mining areas of Queensland and good demand from ex-China markets. Both factors are supporting the high prices.

Thus, Indian merchant met coke producers have no option but to keep offer prices firm, which in turn is adversely impacting met coke consumption. Furthermore, exports from India is currently unviable amidst competitive pricing offered by their Chinese counterparts.

Low demand for pig iron

Domestic met coke producers are highly concerned about the lowering demand of pig iron in the domestic market because of its high prices which had surpassed billet price levels.

Currently, pig iron prices are hovering at INR 47,000/t while billet prices are ranging at around INR 47,000/t ex-Durgapur, as per CoalMint's latest assessment.

Pig iron producers are pressuring merchant met coke producers to lower their prices because of the high cost of production, although they are well supported by high steel prices at present. But there is a question mark over how long such high prices will sustain.

Meanwhile, buyers who are in immediate need of met coke are purchasing the domestic material in smaller quantities due to its higher prices. This is also leading to inventory pile-up at the met coke producers' end.

Outlook

Merchant met coke producers are in a catch-22 situation. They may find it tough to offload in the domestic market in the face of competing Chinese exports and at the same time are not in a position to increase their prices.

Indian met coke prices are more likely to be under pressure in the near term. However, post-the Winter Olympics, prices may find some support as demand for the material is expected to pick up in China around Mar'22 which would lead to higher consumption in China and offer Indian mills lesser opportunities to import.