Indian cement firms seek to defer coal, coke cargoes

The second wave of Covid-19 and a near nationwide lockdown in India is prompting cement producers to seek deferments on coal and petroleum coke shipments.

Some companies have asked suppliers for deferments of up to two months as their fuel consumption has dropped significantly owing to a temporary destruction of cement demand. An executive at a major cement maker said fuel inventories at all of the firm's plants have increased owing to a sharp cut in output since early April. "We are not in a position to receive more shipments until the situation changes," he said.

India, the second-largest cement producer after China, is the biggest market for seaborne coke. The country's cement industry has also emerged as a key buyer of Australian NAR 5,500 kcal/kg coal after China stopped purchasing it. Indian buyers also booked many cargoes of NAR 6,900 kcal/kg US NAPP coal from mid-2020 after coke prices turned expensive.

But the record surge in Covid-19 infections and localised provincial restrictions have cut cement demand by more than 50pc, forcing companies to regulate production, put new purchases on hold and seek to defer booked cargoes.

April-May is typically marked by strong cement demand in the country before the arrival of monsoon rains in June. Companies had procured coal and coke in anticipation of operating at high rates during these two months. But most firms are now sitting on an unusually high fuel inventory at the plants and ports. An executive at another cement maker said his firm has temporarily stopped moving imported coal from portside to its plants given limited storage capacity. Companies have also slowed the lifting of domestic coal from state-controlled mining firm Coal India wherever possible.

Indian cement makers were also forced to seek deferments on the loading of cargoes of petroleum coke last year after a nationwide lockdown took effect in late March. But buyers are facing some difficulty in convincing the suppliers this year, market participants said.

The announcement of a nationwide lockdown by the federal government along with force majeure at ports made a strong case for deferment last year. Companies had to completely halt operations for nearly a month in April last year. But there is no nationwide lockdown this year, plants are allowed to operate, and only provincial restrictions have been announced. Moreover, ports have been functional, making the case for deferment weaker this time.

Indian cement output stood at 294.4mn t in the 2020-21 fiscal year ending 31 March, down by almost 12pc on the year and the lowest since 2016-17, when 280mn t was produced. The unusual double-digit decline was largely triggered by the nationwide lockdown early in the year. The lockdowns and restrictions dented economic activity and weighed on cement demand.

By Ajay Modi