India does not coke well – Newspaper Kommersant No. 201 (7402) of 10/28/2022
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Russia is unable to increase coking coal exports to India due to long travel times, declining demand for steel, the country’s long-term contracts with Australian suppliers and fears of Western sanctions. At the same time, India remains a promising market for metallurgical raw materials: by 2030, the country intends to double its steel production capacity, which will lead to an increase in demand for coking coal. According to analysts, the growth of supplies of Russian raw materials to India will occur only in the event of a decrease in purchases in traditional markets.
Imports of coking coal from Russia to India for the nine months of this year amounted to 1.5 million tons, and for the whole of 2021, supplies were at the level of 1.3 million tons. Such data was presented by the Indian analytical agency Steelmint at the Metalconf 2022 conference.
The growth rate is noticeably lower than that of thermal coal, the supply of which Russia increased multiple times – from 2.2 million tons in 2021 to 5.7 million tons in the first nine months.
India is interested in increasing the supply of coking coal for several reasons. First, coking coal from Russia, like energy coal, is offered at a discount. Secondly, a memorandum has been concluded between the countries, which provides for an increase in imports from Russia from 8 million tons of coal to 40 million tons of coal. Thirdly, Indian metallurgy plans to increase steel production, focusing on the BOF method, where coking coal is the most important raw material.
Unlike iron ore, the country is not provided with coal for metallurgy. According to Steelmint, India by 2030 compared to 2020 intends to double its steel production capacity to 270 million tons, production – up to 215 million tons. The demand for coking coal will also double, to 87 million tons.
In an August report, Steelmint wrote, citing market participants, that Indian steel mills were wary of buying Russian coking coal due to long travel times, declining steel demand, long-term contracts with Australian coal suppliers and fear of sanctions from Western countries in case of direct import.
Purchases of coking coal are carried out by one of the largest Indian steel companies JSW Steel and several traders.
JSW Steel is using Russian coking coal in its Corex smelting process, replacing Australian high-calorific thermal coal that has been trading at $400/t in recent months.
The main markets for Russian coking coal exporters in Asia are Japan, South Korea and China, says Alfa Bank’s Boris Krasnozhenov, noting that these destinations have a much shorter transport distance compared to India. The client base of exporters of coking coal is relatively stable, since the composition of the coal charge is important for coke production and the quality of metallurgical coke, and replacing coal from one producer with coal from another is not an easy process. The discount for the purchase of Russian coal of similar quality is up to 60%.
Given the diversification of coking coal imports by China due to restrictions on imports from Australia, Russian coal mining companies have significantly increased sales to China, the expert says. Russia is able to supply coking coal to the Indian market, but an increase in shipments can only be seen in the event of a significant drop in demand in traditional markets. “Given the size of China’s iron and steel sector, almost all of Russia’s coking coal exports could be diverted to this market. In September, China imported 2.5 million tons of coking coal from Russia,” he notes. In the future, Boris Krasnozhenov believes, price and discount issues will also play a role when choosing between deliveries to China and India.
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