RIL set to change India’s petcoke dynamics

Mukesh Ambani-led Reliance Industries (RIL) will be disrupting yet another industry — this time, as a consumer. The company is shifting from being a major supplier of petcoke to a consumer. This may change the way cement companies source their fuel and the kinds they go for.

RIL has set up a petcoke gasification project, where it is likely to use its own petcoke produce. It will also buy from other producers. Analysts peg the incremental buy at about 4 million tonnes. With RIL supplying about 47 per cent of the domestic petcoke production, current dynamics are bound to change. “Effectively, RIL is turning from a supplier to a buyer,” a commodity analyst said.

An email query sent to RIL on their petcoke requirement and sourcing plans remained unanswered.

One of the most evident impacts the RIL plan would have is higher petcoke imports. “RIL accounted for 47 per cent of the total domestic petcoke production (13.9 million tonne) in FY17. A decline in availability due to diversion of petcoke towards RIL’s gasification project will lead to higher dependence on imported petcoke,” said Rahul Prithiani, director, Crisil Research.

“In the short term, we expect cement players to be increasingly dependent on imported petcoke for clinker production,” Prithiani said.

About five to six years ago, Indian cement firms started to show a preference for petcoke as a cheaper substitute to coal for fuelling their plants. With a host of reasons at play, and now changes in the domestic demand-supply dynamics, this trend may be up for a reversal.

“With the current court order, we will see softening of petcoke import prices for cement makers for a brief period, but this will again change once RIL’s moves from being the supplier to the procurer,” said an analyst with a domestic brokerage firm.

According to Crisil, usage of coal by cement firms increased marginally in the March 2018 quarter and June 2018 quarter due to a rise in petcoke prices.

“Depending on the pricing, cement companies are likely to switch between coal and petcoke,” Prithiani said. About half of the Indian consumption of petcoke of about 26 million tonnes in the last financial year was imported.

Prashant Bangur, joint managing director, Shree Cement, said: “Petcoke is now almost on par with coal in terms of pricing. It does not really matter whether cement makers use petcoke or coal. It will remain dynamic depending on how prices move globally. There are other factors. For instance, China’s import duty on American petcoke may make more of it available for other importers.” RIL’s move may change the type of fuel, but will not have any financial impact for cement companies, Bangur said.

RIL’s plan comes at a time when India has imposed new rules on petcoke imports. On August 17, the government banned import of petcoke as fuel, except for use by a few industries including cement. “Longer term petcoke consumption by cement companies could increase as global demand softens and prices moderate. But, given the restriction on import of petcoke for use as fuel, players are expected to shift to coal for their captive plants,” Prithiani said.

About half of the Indian consumption of petcoke of about 26 million tonnes in the last financial year was imported