South African RB2 (5500 NAR) grade thermal coal prices in India, which had stagnated for a month at INR 5,500/t, shot up this week to INR 6,100/t. The reason behind the escalation is majorly due to shortage of thermal coal at RBCT port amid disruption of Transnet’s rail services, market participants informed CoalMint.
Transnet troubles
On 2 Feb’21, Transnet had issued a notification announcing force majeure at its rail lines serving the terminal following continuous strong winds and heavy rains caused by the tropical storm Eloise. The notification had further added that heavy rains and high winds resulted in slow loading of vessels due to flooded stockpiles, flooded rail lines impacting offloading and berthing of vessels due to high swells and high wind speeds at the terminal.
Transnet was said to be monitoring the situation in order to minimise any negative impact arising from the force majeure, although no update or timeline for a return to normal services has been provided till date.
While the incident was thought to have limited impact on coal loadings at the terminal, resumption of services seems to be improving at a slower pace than expected resulting in lower stocks at RBCT port and a rise in the index.
Offers at higher rates
The RB2 price at Gangavaram port is currently assessed at INR 6,200/t (excluding cess and GST), while offers are higher at INR 6,400/t. At the buyers’ end, the majority of buyers have stepped back in anticipation of a correction in the market in a few days and also because of availability of cheaper domestic coal.
5500 NAR equivalent grade of domestic coal, although with less FC, is currently available at INR 5,000/t ex-mines in Chhattisgarh, which makes it cheaper by INR 400/t against the imported material (after including all taxes and duties in both variants).
Importers shy away from bookings
With Adani acquiring a majority stake in Gangavaram port, a majority of the importers have moved to the sidelines and are not making any bookings for South African coal at Gangavaram port. Also, higher freight rates are keeping importers at bay.
CoalMint’s vessel line-up reveals that 0.92 mn t South African coal is expected at Indian ports by 25 Mar’21, with only 0.17 mn t arriving at Gangavarm port too for JSW Energy Ltd.
The discounts for RB2 coal are heard at $14-15/t whereas for RB3 the discount stands at $24/t. The freight rate for capesize vessel between RBCT to Gangavaram is assessed at $13/t and for panamax it is $21/t.
What lies ahead?
According to CoalMint analysis, the supply situation is anticipated to remain tight at RBCT port in the coming few days, keeping the index at elevated levels. In India, although domestic coal is available, imported coal is required by sponge iron players for blending purpose. As only a few vessels from South Africa are arriving at Gangavaram port and thermal coal stocks are depleting (down by 6% w-o-w), RB2 portside prices are unlikely to see any correction in the coming days.
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