South African thermal coal index (API4) surged by $7/t in last fifteen days amid maintenance work at RBCT port. However, the index is now relatively stable at $92/t.
Portside prices for South African RB2 coal have stagnated as trades dipped and is currently assessed at INR 6,000/t ex-Gangavaram, exclusive of cess and GST.
Few deals of smaller quantity are being heard at INR 5,900/t, while major traders have their offers firm at INR 6,200/t.
Uncertainty in the sponge market
Although still at elevated levels, coal buyers from Indian sponge iron sector (key user of South African coal) have halted their RB2 coal purchases amid the ongoing uncertainty in the sponge iron prices.
The sponge iron prices in India have corrected by around INR 1,500-1,600/t in last fifteen days amid falling billet prices, thus compelling buyers to rein in their raw material purchases.
“While sponge steel demand in India have returned to pre-COVID levels, the sponge producers have taken a backseat amid a recent fall in sponge iron prices and are waiting for some clarity before they resume their RB2 coal purchase from the ports”, remarked a sponge iron manufacturer based in Raipur.
He further added that, sponge iron producers based in Chhattisgarh and Odisha have found alternatives to costlier imports in domestic coal.
Another trader based in Bellary commented that Coal India Limited has improved the availability of domestic coal and has done away with many hurdles, encouraging buyers from the sponge sector to opt for more of domestic coal. He further added, that only those plants based near the coastal belt are now procuring imported thermal coal.
Imports and stock scenario at Indian ports
Supply tightness continues at RBCT port is closed for maintenance till 25 Jan’20. In fact, CoalMint’s vessel line-up data reveals that only 1.48 mn t of S.African coal shipment is set to arrive between 10-30 Jan’20, which is quite lower than the normal average of 2-3 mn t. In terms of stock, the thermal coal stock at Indian ports stood at 16.4 mn t (down by 1% w-o-w) towards the end of last week.
Outlook
We believe that portside prices for RB2 coal would remain firm with minor fluctuations in the coming days as limited imports coming in would give sellers the opportunity to hold out for higher prices.
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