India fears rising coking coal prices, increases imports

Rising coking coal prices have prompted Indian steelmakers to dramatically increase imports of the feedstock. India’s coking coal imports surged 114% on-year to 5.76 million tonnes in July, Kallanish notes.

Offers for Australian premium mid-volatile hard coking coal have grown significantly, by $45-50/tonne on-week to $350-355/t fob Australia, against $300-305/t fob last week for November deliveries, says a market source.

“While steel production [in India] has improved, domestic steel mills had postponed procurements due to higher coking coal prices,” says India Ratings & Research (Ind-Ra). “However, lower inventories prompted steel producers to import higher volumes in July 2021.”

“Australian coking coal prices are receiving support from strong demand from Asian countries, ex-China,” it adds. “The limited availability of prompt coking coal cargoes for near-term deliveries due to logistical issues, including freight and container unavailability and high freight rates, could support coking coal prices over the near term.”

Indian steel companies have increased their production on the back of high demand in international markets. The nation is largely dependent on Australia for its coking coal requirement, and rising coal prices will impact Indian steelmakers’ gross margins.

Coking coal prices are expected to rise further on the back of increasing global steel demand. “Key international benchmark coal prices will remain above our medium-term sensitivity ranges in the near term, but will taper with the resolution of supply problems and geopolitical disputes,” says Moody’s. “We expect that met coal prices will remain robust in 2022 on the strength of the global steel industry.”

India’s finished steel consumption rose 4.8% on-year to 7.66mt in July. However, domestic consumption was down over June-July, on low demand from end-use industries such as construction and infrastructure due to the impact of the monsoon.

Sayed Aameer India