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Pet coke demand may ease in India if cement demand increases

March 04: Usage of petroleum coke by cement industry in India in lieu of steam coal has been increasing steadily during the past few years, but many in cement industry believes that the usage of the refinery by-product may fall significantly if there is revival in cement demand in India.

“Pet coke usage leads to fall in production of cement or in other word leads to increase in production cost because of low volatile matter present in the material, but still Indian cement makers are using it because of its high calorific value that brings down cost of energy in Kcal/kg basis,” an official of a leading cement maker said.

Incidentally, India’s pet coke demand has risen to nearly 13 million tons per annum (mtpa) during the last 5-6 years from a low of around 4-5 mtpa because of higher price of steam coal, which the cement makers were trying to avoid in view of depressed cement market conditions.

Till recently, only Shree Cement Ltd, which had pioneered the usage of pet coke in India among cement makers, was using pet coke, but in recent times, the companies like UltraTech, ACC, Ambuja Cement, Birla Corporation, Hiedelberg, Madras Cement, India Cement and a host of other cement makers too are using pet coke.

“The growth in cement demand in India was lower than the projection, which has led to excess production capacity, and in turn less than expected price realisation prompting manufacturers to look at cheaper fuel option like pet coke,” said another official.

Taking advantage of the situation, pet coke makers within the country were pricing the product in such a way that it was only slightly cheaper compared to imported steam coal or high grade domestic coal.

Sensing the potential demand, a lot of new pet coke manufacturing capacity was set up by refineries like Essar, Indian Oil, HPCL-Mittal Energy Ltd (HMEL), BORL. A few new projects are also being planned by MRPL at Mangalore and IOCL at Paradip.

“However, if cement demand goes up in India, which is unlikely in coming few months, the cement makers will have the flexibility to increase their prices and in turn use steam coal instead of pet coke and this will lead to sharp fall in pet coke prices,” an official of a leading cement maker said.