Indian seaborne coke demand returns

Indian seaborne petroleum coke buying interest has jumped so far this month as domestic coke availability has dropped, import coal prices have risen and the country prioritises domestic coal for utilities.

Domestic coke supply has become tight, with state-controlled refiners MRPL, BPCL and IOC lowering production on planned maintenance. And a jump in LNG prices has encouraged key private refiner Reliance Industries (RIL) to direct some of its coke production to its petroleum coke gasifiers, market participants said.

The Argus delivered India LNG assessment on 3 September was up by nearly 25pc for the first half of October compared with the second half of September, at $18.890/mn Btu. As a result, the refiner cut offers to cement makers this month and is only selling to smaller buyers that do not request bulk discounts, such as lime kilns.

RIL and Russia's Rosneft-owned Nayara Energy are now pricing coke at 14,474 rupees/t ($198/t) and Rs14,518/t, each up by Rs560/t from August and a record high, after 15 consecutive monthly price increases.

As recently as a month ago, Indian refiners were offering wide discounts to their basic monthly prices for bulk buyers such as cement makers. Basic prices, which are tied in part to seaborne coke indexes, were higher than most buyers would accept. But market fundamentals have shifted dramatically in the past two or three weeks.

Companies are starting to come under pressure to secure solid fuel cargoes to meet the anticipated increase in cement demand from October. Most companies were sitting on unusually high fuel inventories until recently as cement output was sluggish following India's severe Covid-19 second wave in April and May followed by monsoon rains. And rising fob prices for coke and coal as well as a surge in freight rates over the last few months had cement makers further putting off buying in hopes of a price correction.

India likely received no fuel-grade coke imports in August for the first time in records going back to 2015. Cement makers had reduced their seaborne coke purchases significantly over the past year as coke has been pricing at a premium to most coals.

But imported coal prices are also extending gains in September, especially for the Northern Appalachia (NAPP) coal favoured by cement makers. Tighter availability of NAR 6,900 kcal/kg US NAPP coal has pushed offers to as much as $200/t cfr India, up by more than a third from offers in the high-$140s/t a month ago. Most NAPP coal ships from the US east coast, but disruptions to coal terminals in New Orleans after Hurricane Ida have tightened the overall US coal export market.

At a cfr price of $200/t, NAPP coal would be equivalent to $9.09/mn Btu on a landed and taxed basis. Even with the sharp increase in 6.5pc sulphur coke prices on a cfr India basis — the last assessment rose to $180/t — US Gulf coke is now at a discount to NAPP coal at $8.30/mn Btu on a landed and taxed basis. Saudi Arabian 8.5pc sulphur coke, last assessed at $170/t cfr, is even more economic by comparison, at a landed and taxed price of $7.88/mn Btu.

At the same time, India is diverting domestic coal supply to power plants, many of which have drawn down coal stocks to critically low levels in recent weeks. As many as 90 plants have stocks equivalent to zero to eight days of supply, according to the latest coal stock data from the Central Electricity Authority (CEA), released on 14 September. Nationwide coal consumption rose to 85.67TWh in August from 78.34TWh a year earlier, according to preliminary data from CEA.

The federal coal ministry recently warned that if domestic captive coal blocks do not ramp up production, it will cut supplies from state-owned producer Coal India (CIL) to their plants. CIL is auctioning more coal to cement makers, but this supply will not be available until next year.

By Lauren Masterson