Indian cement firms make a cautious switch to coal

Indian cement producers are making a conscious yet cautious decision to temporarily replace petroleum coke with coal as a fuel.

A worldwide tightening of supplies of coke because of reduced refinery throughput and a resulting price increase has prompted companies to change their fuel sourcing strategies. But the transition from coke to coal as a fuel for kilns is far from simple. While larger cement producers have almost entirely stopped buying seaborne coke, some mid-size firms continue to stick to the fuel.

Companies across the world are looking at a fuel mix change. Cement plants have altered their fuel mix depending on the capability of the plant, the strategic sourcing director of solid fuels at LafargeHolcim Sanjay Kumar told the Argus Petcoke Live-Virtual Conference yesterday.

A cement plant can switch from coke to coal and vice versa but it needs the will to change since it involves a change in the raw mix. Cement plants will need to use coke if the limestone they buy has a high silica content. "There are many plants which have started switching from coke to coal but a few may have technical issues restricting the transition," said Kumar.

Coke and coal fundamentals have been moving in opposite directions, with tight coke supplies pushing prices sharply higher while coal prices have weakened. This has given a boost to coal bookings from the start of July, particularly among cement producers in India, the largest consumer of coke globally.

But a few mid-size Indian cement producers are still in the market for seaborne coke even though it is expensive compared with coal. Coke prices have been highly volatile since July. But some cement firms are sticking to coke since they think that prices may start easing in a month or two and they will again have to switch back to coke, said a market participant. The price of US 6.5pc sulphur coke delivered to India was yesterday assessed by Argus at $93/t, up from $69/t cfr on 24 June.

Coke is a preferred fuel for cement producers because of its higher calorific value and low ash content compared with coal. "Switching to coal from coke needs a higher coal mill capacity. The limestone quality of most mines is deteriorating and have a higher silica content.This necessitates the use of coke in fuel mix," said the assistant vice-president for fuel sourcing at Nuvoco Vistas Sunit Dey.

The switch to coal is also aided by large inventories of about 62mn t with state-controlled coal producer Coal India as of 31 August. The mining firm is encouraging cement producers to increase offtake of domestic coal. It has also reduced the base price of coal for online auctions by 20-30pc. Cement units located closer to mines are opting for more domestic coal as it is cheaper. But the key drawback of domestic coal is its high ash and inconsistent quality of supplies, Dey said. This also triggers a requirement for use of low-ash fuel such as coke.

By Ajay Modi