Indian cement producers seek coke cargo deferments

India is the world's second-largest cement producer, but the majority of manufacturing units across the country closed after several Indian states announced a lockdown earlier this week until 31 March to control the spread of the coronavirus. This was followed by the federal government's order yesterday to implement a nationwide lockdown until 14 April, bringing all cement industry operations to a complete halt.

The temporary shutdown means plants will not consume any raw material, including coke. If plants restart operations in the second half of April, as planned, it may take a few weeks before operations are normalised. Some market participants also expect the lockdown to be extended further.

Indian buyers had placed fresh orders for coke cargoes with refineries in the US and Saudi Arabia over the past few weeks. Some are already reported to be on the water, although most have yet to be shipped. Companies are now asking suppliers to defer loading by at least a month. A company executive told Argus he was unable to lift imported coke from the vessels at the port since labour and transport services had been curtailed. Several ports in India have announced force majeure on their operations.

Some cement producers said they are finding ways to sell cargoes already on the water. But it is only possible if the seller can find another buyer and if the first buyer is willing to bear additional costs related to the resale process.

The sudden disruption to operations came just as the cement industry was hoping to step up sales before the start of the monsoon season in June. Indian cement demand is usually firm during the first half of each calendar year as developers of real estate and infrastructure projects try to maximise activity before the monsoon.

The shutdown means India may well be out of the seaborne coke market for at least a month. The spread of the coronavirus in the US and Saudi Arabia could also squeeze supplies, market participants said. When Indian companies resume operations, they may initially operate at a low capacity and rely on existing coke stocks and supplies from domestic refiners like Reliance Industries (RIL), Nayara Energy and IOC.

As recently as January, market participants were expecting Indian imports of coke to expand by around 30pc to 14mn t in 2020 on rising demand from existing cement producers and the addition of new Indian cement capacity. The latest developments will soften the growth forecast.

India is estimated to have imported 10.8mn t of coke in 2019, which was already a 61pc increase from a low base in 2018, according to GAC Shipping data. The rise in import demand in 2019 was the result of higher cement demand and greater internal consumption by key producer RIL, which brought more of its 10 new gasifiers on line at its Jamnagar complex.

By Ajay Modi