Indian cement makers to increase coke use over coal

Indian cement makers are looking to expand petroleum coke use in their kilns through imports in order to benefit from competitive prices compared with thermal coal.

Cement makers, the key consumers of fuel-grade coke in India, have been actively securing June and July-loading cargoes in recent weeks to benefit from lower prices. "There is a scope to raise coke use in the kiln fuel mix by at least 5 [percentage points] during the 2023-24 fiscal year ending 31 March 2024," the fuel head at a major cement firm said. This cement maker's percentage of coke in its kiln fuel mix was in the low-30s during 2022-23. The share of coke was low during the first half of the last fiscal year as it was expensive compared with coal at that time, but the company can bring this up to 40pc in 2023-24, he added.

The Indian cement industry raised coke imports by more than 72pc on the year during January-April to 3.21mn t, according to GAC Shipping data.

It imported about 7mn t of fuel-grade coke in the 2022 calendar year, up from below 3mn t in 2021. But imports to India's cement industry appear well placed to cross 7mn t well before the end of 2023, said a market participant. India is becoming an even more crucial destination for US and Saudi coke sellers as demand in other markets remains subdued.

Cement makers are always looking for opportunities to optimise their fuel mix since it accounts for about one-third of cement production costs. Indian cement producer Ultratech raised coke consumption at its kilns to 52pc during January-March compared with 43pc in October-December 2022 and 49pc a year earlier, partly replacing thermal coal as fuel. Ultratech said on an earnings call that it can further raise coke use depending on prices.

Coke now the cheapest fuel

Coke prices have declined sharply this calendar year on improved availability and subdued demand from major consuming markets, including China and Turkey. The cfr India US 6.5pc coke price declined by 28pc since January to a two-year low of $125/t on 17 May, making it the cheapest fuel for the cement industry on a heat-adjusted basis.

Prices of thermal coal, Indian cement makers' main alternative to coke, have also fallen sharply since January but remain expensive against coke on a heat-adjusted basis. Some Indian buyers had temporarily considered seaborne coal, particularly US Northern Appalachian (NAPP) supply, early this year when it offered some discount compared with coke. The cfr India price of NAR 7,500 kcal/kg US coke was in the high-$170s/t in early February, when NAR 6,900 kcal/kg NAPP coal was being offered at $160/t cfr or lower.

The situation has since changed. Supramax cargoes of US coke are being offered at around $120/t cfr or even lower on India's west coast, while NAPP offers are also in a similar range. Coke's higher calorific value compared with coal makes it more attractive.

Offers for Russian NAR 5,500 kcal/kg coal were in the mid-$120s/t on a cfr west coast India basis. Indian cement producers had bought high-CV Russian coal in mid-2022 as coke prices remained stubbornly high and coal prices from most other origins were also at record highs.

Limited domestic coke supply

Any additional coke demand must be met through imports as domestic availability is limited. Domestic coke supply has been curbed since 2022 after Reliance Industries (RIL) stabilised its coke-based gasification project, which means the bulk of its coke is being consumed internally.

RIL produces around 6mn t/yr of coke at Jamnagar in the western province of Gujarat, where its 10 gasifiers have the capacity to consume about 9mn t/yr, or about 750,000 t/month, of coke. RIL used to sell 80,000-100,000 t/month to the domestic market in early 2022, with domestic sales now averaging between 15,000-25,000 t/month, said a participant. In fact, RIL has been regularly importing coke cargoes since late 2022.

New supply source in the region

Indian cement makers may have an additional supply source by end of this year when Oman is expected to ship the first coke cargo from its upcoming 230,000 b/d Duqm refinery.

India, especially its west coast, is a natural market for Omani coke because of its very short voyage of 3-4 days. OQ's Orpic refinery in Sohar, which produces 300,000-350,000 t/yr of anode-grade coke, has sold off-specification coke cargoes to Indian cement makers in the past for use in kilns. Duqm is expected to produce around 500,000-600,000 t/yr of high-sulphur fuel-grade coke. Indian cement makers may be keen on buying Omani coke because of its short voyage, said another participant.

By Ajay Modi