India has become a key export destination for South African coal, especially since past three years, as European nations have cut back their coal usage due to environmental concerns.
However, 2021 is proving to be a different year as Indian importers have moved to the side lines from the offshore market amid very dull demand mainly from sponge iron sector and also due to increased availability of domestic coal, CoalMint learnt from its market sources.
Steep decline in vessels coming from South Africa
India reported a drop of 20% m-o-m in its thermal coal imports at 2.99 mn t from South Africa in January and logic being considered was extension of repair work at RBCT port for fifteen days during the month.
While it was expected that imports would pick up in February, only 0.64 mn t South African coal arrived at Indian ports in February (till 28 Feb), CoalMint’s vessel line-up reveals.
Interestingly no vessel is arriving at Gangavaram, which is quite a popular port for trading of South African coal because of its proximity to Chhattisgarh and Odisha sponge iron market.
How are market participants responding?
Key market participants informed us that imported coal demand from sponge sector has turned dull since past few weeks because of high raw material (pellet /iron ore) cost, stocked-up coal (for 2 months) and increased availability of domestic coal that is proving cheaper than imports.
“Sponge units in Raipur market are operating at 50% capacity, while RB2 (5500 NAR) portside prices are trending at INR 5,500/t, it is costlier by INR 1,000-1,500/t against the domestic coal prices”, quoted a sponge manufacturer based in Raipur. He further added that the proportion of imports to domestic coal used by sponge buyers in Raipur market has changed from 40:60 to 20:80 in present times.
Discounts increased for RB2
While no imported deals have been heard since last week, discounts on South African coal has increased by $3/t w-o-w and is currently at $16-16.5/t whereas for RB3 the same are at $23-24/t for March shipment.
The discounts have increased as the stock at RBCT port is currently trending at usual levels of 3.3 mn t and there is no demand from India while China is on Lunar New Year holidays. Earlier China was not a major buyer of South African coal but has started importing it towards the end of 2020 because of its domestic coal shortage.
Outlook
The thermal coal stock at Gangavaram port till last week’s end stood at 2.98 mn t (up by 1.4% w-o-w). In the present scenario, India’s South African coal imports is likely to remain at subdued levels in Feb’21. However, as per CoalMint analysis, March and particularly April would see an increased import as demand-supply dynamics would balance out by then.
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