Key highlights:
• After a price rally last week, RB2 (5500 kcal/kg NAR) grade portside coal prices at Gangavaram port moved down today by INR 300-400/t.
• The same is currently being traded at INR 4,600-4,700/t (ex-Gangavaram). Prices are exclusive of cess and GST.
• Offers at Paradip and Haldia port are being heard at INR 5,000/t and INR 5,600/t respectively. However no major deals are being concluded yet at these rates as buyers are showing reluctance.
Factors behind the fall
This drop in prices is mainly attributed to a fall in API index by $2-3/t against last Monday’s index price.
In interaction with market participants, we learned that buyers are negotiating aggressively amid sufficient coal stock available at Indian ports.
“Traders at few ports are even selling material that landed in first quarter of 2020. After so many months and that too post monsoon, the moisture content in coal must have increased which is why we are bargaining and traders should be ready to sell their stock at lowered prices”, quoted a thermal coal buyer based in Hyderabad.
When API index moved up last week, thermal coal sellers also raised their portside offers. Subsequently, panic buying started in the market in anticipation of further price rise. This resulted in thermal coal stock at port (in week 40) to deplete by 4% w-o-w basis at 14.3 mn t.
Despite the stock reduction, it is still higher by 25% than last year’s (week 40) thermal coal stock of 11.4 mn t at Indian ports. This coupled with neutral demand especially from sponge iron sector and strong negotiations from buyers made portside coal prices fall on Monday.
Outlook ahead
Industry participants believe that market for South African coal is quite uncertain at the moment due to sluggish demand, lower landed cost of Australian coal and fluctuating sponge iron prices.
Given sufficient coal stock at various ports, portside prices are unlikely to see any jump until API index shows a dramatic uptrend.
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