India: Met coke offers rise by INR 2,000/t on surge in coking coal prices

Domestic offers for metallurgical (met) coke in eastern India have increased by INR 2,000/t on the back of coking coal prices that have risen by $44/tonne (t) w-o-w. The offers in western India were heard to be unchanged.

While the buyers are reluctant to accept the higher offers, sellers are unwilling to lower their offers in apprehension of further rise in coking coal prices.

Buyers’ reluctance

When inquired about the buyers’ reluctance to accept raised offers, CoalMint learnt that the met coke being sold at present has been produced using coking coal stock procured comparatively cheaper 1-2 months back.

“The average cost of met coke production from coking coal procured a month back at $350/t does not come around to the levels sellers are charging at present . Thus, we are asking for lower rates,” said  a buyer based in eastern India.

Sellers’ stance

Merchant coke sellers, on the other hand, said they are increasing offers in line with the current coking coal prices as the shortage in imported coking coal has been severe and is expected to persist till Mar-Apr’22. “As there is a supply crunch and demand is exceeding supply, we have to increase our rates,” said a seller.

Australian premium coking coal prices surge

Australian seaborne coking coal prices increased by $26/t w-o-w. There have been an increase in inquiries for Australian coking coal from ex-China markets from the start of CY’22. However, supplies from Down Under is being hampered by more-than-average rainfall due to La Nina. Adding to the woes are labour issues at mines due to Covid-induced restrictions.

“Previously, there used to be offers for 4-5 coking coal vessels in a month. However, since the past few months, there is hardly a single vessel of inventory  being offered for sale by the major miners in Australia. There are acute supply constraints in the country and the situation is expected to remain so at least till March,” said a trader based in Singapore.

Indian steel demand picks up slowly

Meanwhile, steel demand in India is picking up gradually despite the third wave of Covid due to its less severity and improved sentiments in the infrastructure, auto and white goods sectors.

However, demand still has not picked up to the levels usually seen in the first quarters of the pre-pandemic years.

Outlook

Domestic met coke prices are expected to touch around INR 50,000-51,000/t in the coming weeks as coking coal prices are expected to soon hit an even higher level of around $450/t, FOB Australia.

Subsequently, when coking coal supplies improve from March-end or April, prices are expected to correct and stabilise.