Refinery run cuts curb Indian petroleum coke supply

Availability of domestic petroleum coke in India is expected to remain tight this month, as leading refiners cut throughput and undergo maintenance shutdowns. The squeeze coincides with tightness in seaborne markets, especially for US supply.

India's biggest state-controlled refiner IOC has reduced crude runs at its refineries because of high oil product stocks and a slower-than-expected recovery in demand. The firm's average utilisation rate is now 73pc, compared with 93pc in the first week of July.

Fellow state-run refiner BPCL resumed operations at a 200,000 b/d crude distillation unit (CDU) at its 310,000 b/d Kochi refinery this week after a scheduled shutdown. But it will also shut a secondary unit at the 240,000 b/d Mumbai refinery for three weeks this month.

Private-sector Reliance Industries (RIL) has shut one of the CDUs at its 1.36mn b/d Jamnagar refinery for 3-4 weeks of maintenance that started in the fourth week of July. And IOC's 300,000 b/d Paradip refinery on the east coast is undergoing a two-week maintenance shutdown that is scheduled to end on 11 August. The refinery produces an average of 110,000 t/month of coke.

Indian fuel demand slowly recovered from May, following a full-month nationwide lockdown in April that was aimed at curbing the spread of Covid-19. But the trend did not last because of an increase in virus cases that has led to regional lockdowns being imposed until at least 31 August. India's gasoline use was 553,000 b/d in July, down by 4pc from 575,000 b/d in June, according to data from state-controlled refiners that account for around 90pc of the country's fuel market. Diesel use fell by 15pc to 1.17mn b/d from 1.37mn b/d. Consumption last month was well below levels in July 2019.

Domestic coke output has also been partially impacted by refiners temporarily shifting to light sweet crude from sour crude grades. The economy has not recovered yet and the situation may improve only after September, when the monsoon rainfall season ends, one market participant said.

The shortage of coke, together with firm seaborne coke prices, prompted RIL, Russian-owned Nayara Energy and IOC to increase their August basic coke sales price by up to 24pc compared with July. That was the second consecutive hike in monthly prices and follows an increase in seaborne coke prices.

The increase in coke prices has led to a decline in enquiries for seaborne cargoes from Indian cement makers, as they focus on coal as a cheaper alternative. Indian cement makers have also objected to the latest price increases by domestic refiners. The Indian cement industry, the second biggest in the world, accounts for 71pc of the nation's total coke consumption.

Firm global coke prices have bolstered industrial demand for seaborne coal in Asia-Pacific, and the trend could expand to other regions if coal continues to be competitive.

By Ajay Modi