Daily Archives: November 30, 2010
Buyers of calcined coke have no cause for celebration, thanks to the recent tender that National Aluminium India (Nalco) issued.
Nalco invited 4 Indian companies to bid for 70,000 tonnes of calcined coke. Three of the bidders were well-known capable producers, while the 4th was a tiny Government-owned operation. They refused to allow any other bidders into the tender.
When Nalco opened the bids, they found that the small-fry producer was lowest price, with US$426. But that producer was unable to supply more than a fraction of the total coke on offer. Nalco called on the other bidders to match the low price. All three refused, and stuck to their original price. That wouldn’t be so bad, but the next best price was US$616. Nalco had no option but to accept that price.
Lo and behold, the three successful bidders are now telling the other smelters in India that the new benchmark price is US$616.
Clearly this is very bad news for the rest of the market. The Indian smelters had been buying from China, but had recently returned to the Indian suppliers as the Chinese price started rising. If they go back to China, the Chinese producers will soon find out what is going on in India.
It won’t take long for the rest of the market to then find themselves being hit by $600 prices from two fronts, both Indian and Chinese producers. That in turn will be an invitation for US based producers to move their prices up as well.
Market fundamentals should take over, and drive the price back down to more realistic levels, but the market fundamentals are also set for a shake up. China is set to soon move out of its energy restriction phase, with a big increase in aluminium production in Q1 2011, along with anode demand. Green petcoke prices will likely rise in line with demand from both aluminium for anode grade and cement for fuel grade.
All this because one small buyer followed antiquated purchasing practices, and refused to allow the wider market to take part.