South African coal offers have continued its stay at higher side this week, with coal index API-4 assessed at USD 104.15 for Jun’18.
Discount on coal prices has witnessed no significant change from the previous week with discount on South African 5500 NAR coal remained constant at USD 7/MT, while the discount on 4800 NAR coal was assessed at USD 14/MT.
The prevailing supply tightness has turned the coal market bullish, due to which South African miners had held on to the discount offered on coal.
Current offer for South African 5500 NAR coal was assessed at USD 89-90/MT, FoB Richards Bay, while offer for 4800 NAR was heard at USD 71-72/MT, FoB Richards Bay.
The recent imposition of a strict sulphur cap on coal imports by the South Korean government would likely add to the demand for South African coal. As from Jul’18, the South Korean power utilities are restricted to burn coal with an average sulphur content of 0.4% over the course of the year.
The said limit would eventually close the door for much of the high ash content Australian thermal coal imports into South Korea, which in turn would increase the likelihood for South African coal imports.
According to the data provided by South African customs, coal export to South Korea had increased 204% Y-o-Y to 8.33 MnT in CY17 compared with 2.74 MnT in CY16.
Indian Market Scenario:
Rising South African coal offers have kept Indian buyers at bay, which were waiting for correction in coal prices while evaluating the alternatives to the South African coal.
An Indian trader had commented that Cement manufacturers were catering their demand from US and Indonesian coal, whereas Sponge Iron plants had no option than to procure South African coal to carry out their operations.
Indonesian 5800 GAR coal, which is equivalent to South African 5500 NAR coal on energy basis, was available at USD 78-79/MT on FoB basis. However, Sponge Iron manufactures generally prefers South African coal as it provides higher Fixed Carbon to Volatile Matter (FC/VM) ratio which is needed for uniform burning and temperature control in sponge kiln.
He had quoted stock and sale offer for 5500 NAR coal at INR 7650/MT from Vizag port, while 4800 NAR coal was priced INR 6235/MT, (excluding GST and Compensation cess).
However, another trader had doubted the sustainability of South African coal prices, claiming that the delivered cost of South African coal was too high and not viable for the manufacturers to produce Sponge Iron.
He had informed that the sponge manufacturers had stocked enough coal, while there were also many domestic coal rakes pending to be delivered, which would cater their coal demand.
South Africa coal 5500 NAR coal offers were assessed at USD 104-105/MT on CFR basis for a panamax vessel, while offer for 4800 NAR coal was USD 86-87/MT, CFR India.
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