Pet coke imports on a rise as coal substitute

29 May 2017

The coal ministry has been striving to cut down on the country’s coal imports and related import bill. The coal consuming sectors, however, have shifted to imported pet coke usage, adding up to the country’s import bill on the petroleum side.

According to data available with the Petroleum Planning and Analysis Cell (PPAC), the country imported 39.8 per cent more of pet coke in the last financial year. This has also made pet coke the largest contributor to the total petroleum products that the country imported in that period.

“Import of Petroleum, Oil and Lubricants (POL) products increased by 17.0 per cent during March 2017 as compared to March 2016 mainly due to increase in import of LPG,” according to PPAC.

“Import of POL products increased by 21.7 per cent during April 2016 to March 2017 as compared to the same period of the previous year (2015-16) with imports of liquefied petroleum gas (LPG) and pet coke accounting for 95.0 per cent of total increase of 6.4 million metric tonnes (MMT),” added PPAC.

The rise in import of pet coke is largely attributed to end users like cement companies opting for pet coke usage as a cheaper option instead of coal.

“Some of the end consumers who use coal due to cost economics are moving towards usage of pet coke. These decisions are being taken based on the landed cost involved for coal against pet coke and because pet coke has a high calorific value,” said Rahul Prithiani, director, CRISIL Research. According to S&P Global Platts data, in March last year, delivered-India prices of pet coke plunged to a low of $39.50/tonne, while thermal coal was trading at a higher price of about $47-$48/tonne (cost and freight) CFR India.

“Given the low landed costs for pet coke, a lot of cement companies in India shifted to using pet coke from thermal coal, leading to huge demand for seaborne petcoke cargoes,” said Deepak Kannan, managing editor, Asia Thermal Coal, S&P Global Platts.

Whether the trend would continue, will largely depend on which side petcoke and coal prices are likely to move. “It is difficult to estimate, if prices remain lower, the trend is unlikely to change,” said an oil and gas analyst who did not wish to be identified.

Others like Prithani expect the trend to continue. “Consuming sectors going forward will take this call based on the pricing, where pet coke generally trades at a discount to coal and the trend of rising imports should continue,” he said.

The end consumers so far have been playing it safe by staying flexible in their procurement based on prices movement.

“Indian buyers are price sensitive and they tend to procure either thermal coal or pet coke depending on whichever makes more economic sense. Thermal coal prices are beginning to drop in recent days and there seems to be some buying interest coming back for South African thermal coal while demand for pet coke is slowing due to higher landed prices,” Kannan said.

“There had been restocking activities for pet coke due to the upcoming Indian monsoon season in recent weeks, but buyers are currently not in a hurry to procure any fresh cargoes as they expect pet coke prices to soften going forward,” Kannan added.

The volume of pet coke imports, however, still remains small compared to coal. For the period of April-December 2016, India’s total coal imports were at 144.87 million tonne, according to data available with PIB. Pet coke imports for the financial year 2016-2017 was at 14 million tonnes.

There is a word of caution as pet coke prices are currently on the rise. According to S&P Global Platts data, at present pet coke prices have remained sharply high at about $95-$96/mt CFR India, compared to thermal coal with a heating value of 5,500 kcal/kg NAR currently trading at about $73.90/mt CFR India East.

In addition to price movement, dry bulk freight rates are also expected to impact the India buyer’s decision. Further, what could also add to India’s import bill is its own decline in pet coke production.

According to PPAC data, India’s pet coke production fell 3 per cent in the last financial year. Most analysts attributed this fall in production to Reliance Industries’ pet coke gasification project.

Source – business-standard