Petcoke ban drives India's North American coal imports to new heights

Fears that the Indian government may extend the current ban on petcoke use in the New Delhi Capital Region to the entire country has led to a surge in coal imports from North America, reports Reuters.

In October India’s coal imports from North America quadrupled to 2.1Mt when compared with the year-ago period, hitting new heights since January 2015. Moreover, ship tracking data on Thomson Reuters Eikon showed that between 1-20 November such imports are already 70 per cent of last month’s purchases.

The largest consumer of petcoke, the domestic cement industry accounts for around 75 per cent of India’s 27Mta petcoke demand. To keep plants running and anticipating an extension of the ban, cement producers are shifting to the use of coal.

As a result of the increased demand, coal prices have surged with the price for a tonne of 6900kcal/kg US coal rising to INR8200-8300 or US$126-127/t (CoalShastra), a significant hike when compared with INR7100-7200/t two weeks ago.

Meanwhile, share prices of cement companies fell sharply on Monday following Friday’s Supreme Court order reiterating the NCR ban. The Court clarified that the ban is also applicable across Rajasthan, Haryana and Uttar Pradesh.

Shree Cement, which has a fuel mix of 100 per cent petcoke, saw its share price fall by 4.2 per cent to INR17,529 while JK Lakshmi Cement and ACC experienced a share price drop of 4.6 and 3.4 per cent, respectively. Shree Cement has been reported as aggressively bidding to secure supply linkage from state-owned Coal India.

JK Lakshmi’s dependence is around 75-85 per cent while ACC’s is between 65-67 per cent of its fuel mix. However, both companies have tailored their plants to either use petcoke or coal and it is expected that the switchover will not cause any issues.