3. pranay shukla

Coal vs Petcoke – India Perspective

Pranay Shukla Senior Dry Bulk Analyst

Indian economy and infra sector

IMF projected that India will overtake China as the fastest growing emerging economy in 2015-16 by clocking a growth rate of

7.5%, helped by its recent policy initiatives, pick-up in investments and lower oil prices.

India would become fourth largest infrastructure projects market in the world by 2025 as real estate and construction sector is

continuously evolving in the country, according to a Royal Institution of Chartered Surveyors (RICS) report.

1,500

2,000

2,500

3,000

3,500

4,000

1 4 7

10

13

16

19

22

25

28

31

34

37

40

43

46

49

52

INFRA SECTOR INDEX

2011

2012

2013

2014

2015

Indian cement industry (Units: Million Tonnes)

-

20

40

60

80

100

120

140

160

180

South India North India Central India West India East India

Indian Cement production Capacity

CMA Members Non-CMA Members

123 , 31%

273 , 69%

Non-CMA Members CMA Members

Sector wise cement consumption and demand projections

67%

13%

11%

9%

Sector Wise Cement Consumption

Housing

Infrastructure

Commercial

Industrial

0

200

400

600

800

1000

1200

1400

1600

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2022 FY2027

Cement Demand Projections (Units: Million Tonnes)

Cement Capacity Cement ProductionSource: 12th Planning Commission Source: Ambhuja Cement 2013 Annual report

Prime Minister Mr. Narendra Modi in Jan 2015 chaired a review meeting on the goal of "Housing for All" by 2022.

The meeting was to finalise the contours of the “Housing for All Mission”, which is one of the priority commitments of the

government.

The programme proposes to build 20 million houses across the nation by 2022.

Procurement of fuel

0

2

4

6

8

10

12

14

16

FY20

03

FY20

04

FY20

05

FY20

06

FY20

07

FY20

08

FY20

09

FY20

10

FY20

11

FY20

12

FY20

13

Procurement of fuel by members of CMA

Linked Coal Imported Coal Coal from OM Petcoke

In recent coal block allocations four coal blocks were

awarded as below:-

Source: CMA, Mercuria. *All units in million tonnes

** CMA – Cement Manufacturers Association

*** Coal from OM- Coal from Open Market

Coal Block

Production

Capacity Winner Remarks

BICHARPUR 0.8 ULTRATECH CEMENT

MANDLA SOUTH 0.3 JAYPEE CEMENT

SIAL GHOGRI 0.3 RELIANCE CEMENT

GARE-PALMA-IV/8 1.2 AMBHUJA CEMENT To Commence operational in 2018

*Ambhuja Cement is not a member of CMA

Petcoke imports into India in 2014 (Units : Thousand Tonnes)

0

700

1,400

2,100

2,800

3,500

USA CHN CAN SAU KWT

Origin Countrywise shipments

Petcoke Imports in 2014

-

400

800

1,200

1,600

2,000

West Coast East Coast

Origin Country - Indian coast wise

USA CHN CAN SAU KWT

Petcoke imports into India in 2014 (Units : Thousand Tonnes)

-

700

1,400

2,100

2,800

3,500


Discharge port - Indian coast wise

TUTICORIN HALDIA PARADIP

KARAIKAL VIZAG KRISHNAPATNAM

GANGAVARAM BEDI KAKINADA

MUNDRA PIPAVAV KANDLA

NEW MANGALORE MORMUGAO

-

200

400

600

800

1,000



MORMUGAO NEW MANGALORE KANDLA

PIPAVAV MUNDRA KAKINADA

BEDI GANGAVARAM KRISHNAPATNAM

VIZAG KARAIKAL PARADIP

HALDIA TUTICORIN

Thermal coal imports into India in 2014 from selected countries (Units : Million Tonnes)

0

7

14

21

28

35

SAF AUS USA

Origin Countrywise shipments

Coal Imports in 2014

-

4

8

12

16

20


Origin Country - Indian coast wise

SAF AUS USA

Thermal coal imports into India in 2014 from selected countries (Units : Million Tonnes)

-

5

10

15

20

25



-

2

4

6

8

10



Distance travelled by petcoke shipments to reach Krishnapatnam (EC of India)

Days in Sea Jubail (Saudi Arabia) Shuaiba (Kuwait) Yanbu (Saudi Arabia) Nanjing (China) New Orleans (USA) Richards Bay (South Africa) Gladstone (Australia) Baltimore (USA)

Krishnapatnam 10.3 10.7 13.6 14.7 39.4 16.1 18.9 35.0

* Speed: 11.3kt's

COALPETCOKE

Distance travelled by thermal coal shipments to reach Krishnapatnam (EC of India)


Krishnapatnam 10.3 10.7 13.6 14.7 39.4 16.1 18.9 35.0

* Speed: 11.3kt's

COALPETCOKE

Distance travelled by petcoke shipments to reach Kandla (WC of India)


Kandla 4.3 4.8 9.1 19.0 34.9 15.8 22.9 30.5

* Speed: 11.3kt's

COALPETCOKE

Distance travelled by thermal coal shipments to reach Kandla (WC of India)


Kandla 4.3 4.8 9.1 19.0 34.9 15.8 22.9 30.5

* Speed: 11.3kt's

COALPETCOKE

Prevailing Low Freight Rates …. Opens alternative for longer haul origins

0

500

1,000

1,500

2,000

2,500

1 21

41

61

81

10

1

12

1

14

1

16

1

18

1

20

1

22

1

24

1

26

1

28

1

30

1

32

1

34

1

36

1

Baltic Exchange Dry Index

2013

2014

2015

0

1,000

2,000

3,000

4,000

5,000

1 21

41

61

81

10

1

12

1

14

1

16

1

18

1

20

1

22

1

24

1

26

1

28

1

30

1

32

1

34

1

36

1

Baltic Exchange Capesize Index

2013

2014

2015

0

500

1,000

1,500

2,000

2,500

1 21

41

61

81

10

1

12

1

14

1

16

1

18

1

20

1

22

1

24

1

26

1

28

1

30

1

32

1

34

1

36

1

Baltic Exchange Panamax Index

2013

2014

2015

0

400

800

1,200

1,600

2,000

1 21

41

61

81

10

1

12

1

14

1

16

1

18

1

20

1

22

1

24

1

26

1

28

1

30

1

32

1

34

1

36

1

Baltic Exchange Supramax Index

2013

2014

2015

*Source: Baltic Exchange

Prevailing Low Bunker Rates

200

300

400

500

600

700

800

1 4 7

10

13

16

19

22

25

28

31

34

37

40

43

46

49

52

Rotterdam IFO 180 ($/t)

2011

2012

2013

2014

2015

200

300

400

500

600

700

800

1 4 7

10

13

16

19

22

25

28

31

34

37

40

43

46

49

52

Singapore IFO 180 ($/t)

2011

2012

2013

2014

2015

200

300

400

500

600

700

800

1 4 7

10

13

16

19

22

25

28

31

34

37

40

43

46

49

52

Houston IFO 180 ($/t)

2014

2015

200

300

400

500

600

700

800

1 4 7

10

13

16

19

22

25

28

31

34

37

40

43

46

49

52

Fujairah IFO 180 ($/t)

2014

2015

*Source: Bunker World

Fuel Price Trends

Oil crashed but still petcoke was relatively strong as petcoke

prices are more inelastic.

Coal prices are down on back of more supply than demand.

Petcoke to Coal price ratio has increased making coal more

competitive over petcoke

*Source: McCloskey; USG HS Petcoke 7500 NAR prices have been normalized to

6000NAR

40

53

65

78

90

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-13

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Price movements

USG HS Petcoke (n) USG HS Coal

RB1 Coal

0.50

0.63

0.75

0.88

1.00

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3

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Petcoke vs Coal

Ratio: USG HS Petcoke(n)/USG HS CoalRatio: USG HS Petcoke(n)/RB1 Coal

40

63

87

110

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3

4-M

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4-J

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14

4-S

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-14

4-N

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-14

4-J

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5

4-M

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15

Brent Price

Brent Price

Brief about Petcoke shipments/demand trend in India

RIL has started work on a $4 billion coke gasification project at its Jamnagar facility. As part of the coke-gasification

project, pet coke at the Jamnagar refinery will be upgraded to syngas for further use as fuels and for hydrogen and

chemicals production. The coke gasification project is to convert coal and coke, the lowest-cost fossil fuels, into gas.

RIL, one of the biggest domestic producers of petcoke in India, would be using its product for its own consumption,

gradually taking 6-7 million tonnes off the market by year’s end.

RIL sold petcoke in the open market for some time as it gave good returns. Now, with LNG prices soaring and

availability of natural gas a challenge, syngas is the best option available. Reliance is expected to also use imported

petcoke to feed its gasificaton project. This will mean more demand for imported petcoke into India.

The Jubail refinery, also known as SATORP, a joint venture between Saudi Aramco and Total, is expected to ship out

between three and five cargoes per month.

At the Yanbu facility, a joint venture between Saudi Aramco and Sinopec, production is expected to begin in April/May

with two cargoes initially, but that could ramp up to the same production levels as Jubail.

Conclusions

• India is well favoured for having a healthy demand vis a vis the growth figures and the Mr Modi missions, which

should help strengthen construction and cement demand.

• The country remains one of the largest growing markets for solid fuels, and in this case particularly for both coal

and petcoke

• And it makes Indian buyers have a good pick of sources for fuel: South Africa, USA or Australia for coal and

having the alternative of petcoke as well

• Indian buyers are price sensitive, so there is no real preference for the fuel they get, as long as the price is right

• India is expected to overtake Japan as the biggest market for petcoke once Reliance gassifiers become

operational

Thank You

Pranay Shukla

+91 22 420 67 678

[email protected]

3. pranay shukla

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