Lower freight, demand pressures cfr India coke price

Delivered India coke prices fell for the first time since late October 2020 last week on a drop in freight rates and lower demand.

The cfr India 6.5pc sulphur coke price slipped by $2.50/t on the week to $127.50/t, although this is still a record-high level.

Indian cement buyers, the primary end users for petroleum coke, have been sharply reducing coke imports as prices rise, particularly in comparison with competing coal. Many have turned to coal and eschewed term contracts with US refiners this year.

But until recently, Indian cement demand was strong, keeping overall fuel demand steady. Plants were running at 100pc utilisation and delaying planned maintenance, in part to try and catch up to volume goals before the end of the fiscal year on 31 March. And the Indian cement industry has added 18mn t/yr of capacity within the past 2020-2021 fiscal year.

Now, as a new fiscal year begins, some plants have begun maintenance shutdowns. Rising Covid-19 cases and partial lockdowns in some provinces also threaten cement consumption, which has subdued buying interest for both coke and coal.

Historically high freight rates had also played a role in pushing cfr India prices higher in recent months, but these began to fall in the last three weeks. Rates for supramax vessels on the US Gulf coast-to-east coast India route had steadily climbed before reaching near record highs of $51.25/t in early March, holding at that level for two weeks before falling gradually between late March and early April. But the rate for this route dropped by an additional $2.50/t last week to $48.50/t, adding more downward pressure to delivered India coke prices.

But other delivered coke prices in Asia have continued to rise, especially in China where domestic coal prices are moving higher on short supply.

Chinese thermal coal stockpiles are unusually low for this time of year, and two main coal producers plan to reduce their coal output this year. Additionally, operations at some coal mines in China's largest producing province of Shanxi have been suspended indefinitely for allegedly breaching safety protocols.

Imports of Australian coal are also limited because of trade tension. Australia did not export any thermal coal in February for two consecutive months, the first time this has happened in 20 years.

Higher anticipated demand from the power sector in China this year has the potential to boost demand for petroleum coke if thermal power plants are not able to secure enough coal supply at lower prices.

By Sarah Tucker