Indian petroleum coke imports are forecast to increase to around 12mn t during the country's 2016-17 fiscal year starting 1 April, as lower global prices encourage industrial users like cement producers to move away from more costly seaborne thermal coal. An increase in petroleum coke consumption could put even more pressure on demand for thermal coal at a time when imports are already falling.
Indian coke imports have risen sharply during the past year as global prices have plunged. The country's receipts reached 7.9mn t during April-January, the first 10 months of 2015-16. Shipments reached 1.07mn t in January, the highest monthly volume during the period. The country imported around 4.5mn t of petroleum coke during 2014-15, with the majority coming from the US and Saudi Arabia.
The main factor driving the increase in petroleum coke imports has been a plunge in global prices, which in part has been brought about by rising supplies after Saudi Arabia emerged as a supplier of high-sulphur petroleum coke to India since last year. Prices of US petroleum coke with 6.5pc sulphur content and 40 HGI, the grade which is most commonly used by Indian cement manufacturers, are currently at $40.50/t on a cfr India basis, which is 48pc or $37/t lower than a year earlier.
But the decline in the cost of NAR 6,000 kcal/kg South African thermal coal, which is often used by Indian cement producers that can switch between thermal coal and petroleum coke, has been far less pronounced. Fob Richards Bay prices of NAR 6,000 kcal/kg coal are currently at $51.98/t, just $9.06/t lower than a year earlier, while Capesize freight from Richards Bay to east coast India is at $4.20/t that is around $1.80/t lower than a year ago.
India's petroleum coke imports are also poised for a boost this year as buyers previously dependent on supplies from Indian private-sector refiner Reliance Industries (RIL) turn to new sources. RIL is preparing to ramp up a petroleum coke gasification project and consume more of its own supplies.
Lower petroleum coke prices are encouraging Indian manufacturing companies that operate their own captive power plants to switch away from thermal coal in favour of cheaper coke. A large-scale Indian cement producer last year modified at least one of its captive coal-fired plants with a capacity of around 2.5MW and previously ran on thermal coal to run solely on imported petroleum coke, said an India-based supplier. At least two other cement firms are also making similar modifications to small captive power plants that they operate, he said.
While the increase in petroleum coke consumption by small-scale power plants may displace thermal coal, it is difficult to project by how much. Operators are able to blend thermal coal with coke to varying degrees, as well as switch between petroleum coke and coal depending on pricing dynamics, according to participants at a coal industry conference in Goa last week. But if coke prices stay depressed, more manufacturing firms that have the ability to switch away from more costly thermal coal are likely to do so, they said.
The aluminium smelting arm of India's private-sector firm Vedanta Resources last week said it is seeking 100,000t of fuel grade petroleum coke with a calorific value of up to 8,500 kcal/kg for power plants it operates in Orissa and Chattisgarh. Vedanta is seeking two 50,000t shipments for arrival in April and May in a tender closing on 20 March, having previously run successful trials at the plants. The company did not specify which origin of petroleum coke it is seeking, but a maximum sulphur content stipulation of 8pc suggests that either US or Saudi material could be offered into the tender.
