October 25, 2024 - The availability of cheap high-sulfur petcoke from the US is becoming a cause for concern for US thermal coal suppliers as buyers in India, the top destination for US coal, shun coal in favor of petcoke.

In recent months, prices of India-delivered petcoke have been on a downtrend amid muted demand from the cement industry and ample supply of high-sulfur petcoke due to the absence of Chinese buyers.

Platts-assessed weekly CFR India 6.5% sulfur US petcoke averaged $101.30/mt from the beginning of August to Oct. 23, down sharply from the average of $125.65/mt in the year-ago period, S&P Global Commodity Insights data showed.

India-delivered petcoke has fallen $17.50/mt since hitting a high of $110/mt at the beginning of Augu, to be last assessed at $92.50/mt Oct. 23 -- the lowest since it was assessed at $92/mt Dec. 2, 2020.

"With petcoke prices around $50/mt FOB, it is destroying US FOB Baltimore 6,900 kcal/kg NAR coal sales into India and there is so much [coal] coming out of the US, it is presenting problems with US NAPP (FOB Baltimore 6,900 kcal/kg NAR coal) inventories in India," a US-based trader dealing with Indian petcoke and thermal coal market said.

Meanwhile, FOB Baltimore coal prices have averaged $74.95/mt FOB since August, down from $88.40/mt in the year-ago period. However, on a delivered basis the thermal coal price is up by more than $10/mt considering that the Platts-assessed freight rate between Hampton Roads, US East Coast and Paradip, East Coast India has averaged $40.45/mt during August-October this year, up from $36.65/mt in the year-ago period.

FOB Baltimore 6,900 kcal/kg NAR thermal coal is typically the preferred alternative to petcoke due to its high calorific value and sulfur content, especially when petcoke prices are sharply higher compared with thermal coal prices.

"[Stock and sale traders in India] are squaring off [their] position and aiming to sell until it has some value and willing to offer a $6-$7/mt discount on the current levels of [US coal delivered to India] as they cannot hold on to it for long because they will start incurring loses, so the thinking is to sell at some level as long as they can," an India-based thermal coal and petcoke buyer said.

Several India-based stock and sale traders with decent stockpiles of US thermal coal are willing to offload their port stocks at steep discounts to cut their losses on current coal stocks and place fresh bets on petcoke.

A UAE-based trader highlighted that considering the current situation, they are willing to lose out on $35-$40/mt in a bid to offload existing US thermal coal inventory as they "can't do anything" given the current market situation.

"We had bought cargoes earlier, incurred losses on those and [so we are] not buying them anymore," the UAE trader said. 

Downturn in delivered-petcoke prices 

India's federal commerce ministry allows imports of petcoke only for some select uses such as feedstock for the cement, lime kiln, calcium carbide and gasification industries, with the cement industry being the major consumer.

However, in recent quarters, healthy stockpiles coupled with weak construction activity have reduced appetite from India's cement industry to import petcoke.

Construction was notably slow in the April-June quarter due to the general elections in India, while above-average rainfall in the following quarter caused some disruption to construction activities. Consequently, the surplus stocks that built over April-September have carried over into the current quarter, resulting in significant inventories at both ports and cement plants.

Moreover, China's reported ban on high-sulfur petcoke in favor of lower sulfur material has led to an oversupply situation in the high-sulfur market, with Saudi Arabia -- a key supplier of high-sulfur petcoke to China -- becoming heavily reliant on India as an export destination. The abundance of high-sulfur petcoke has given buyers greater leverage to influence prices, even for US-origin petcoke.

India's petcoke imports in the first five months of the fiscal year 2024-25 (April-March) reached 4.8 million mt, up from 4.3 million mt in the corresponding period of FY 2023-24, according to data from India's Petroleum Planning and Analysis Cell.

However, the pace of year-on-year increase has come down sharply compared to the first five months of the previous financial year -- 11.6% growth In 2024-25 compared with 26.5% in the first five months of FY 2023-24.

Meanwhile, US thermal coal exports to India totaled 3 million mt in the July-October quarter, down from 3.5 million mt in the year-ago period, according to S&P Global Commodities at Sea data.

US suppliers exploring new markets 

While Indian buyers are seeking steep discounts on US thermal coal, producers in the US are unwilling to lower prices from current levels as it becomes operationally unviable.

"High-cost production in the US has turned into high-cost inventory with limited interest for thermal coal, moreover, railroads and barge lines are not interested in lowering prices to compete for more tonnage," the US-based trader said.

Indian buyers' reluctance to procure fresh supplies of the US material is prompting the US suppliers to explore other avenues to offset the trade imbalance, competing in markets where Colombian thermal coal typically dominates.

"There's pressure from US material; US producers trying to place more volume in the international market," a Colombia-based thermal coal producer said.