India: RB2 portside trades turn mute after Adani acquires majority stake in Gangavaram port

On 15 Mar’21, Adani Ports and Special Economic Zone Ltd (APSEZ) acquired 58.1% stake in Gangavaram Port Ltd previously held by DVS Raju and family, the original promoters of the port, in a deal worth over INR 3,600 crore. The deal raised APSEZ’s stake in the port to 89.6%.

Market participants informed CoalMint that trading activities at Gangavram port turned sparse after Adani gained a dominant stake in the port, with a majority of sellers already having sold off their material. Buyers reportedly stepped back from fresh bookings amid speculations of rise in handling charges and plot rent at the port.

Portside prices for South African RB2 (5500 NAR) coal that witnessed a rally of INR 1,200/t in the past two weeks rose to INR 7,100/t ex-Gangavaram this week, (prices are excluding cess and GST).

“After Adani took over Krishnapatnam port last year, handling charges increased and now not many traders bring cargoes there. We are expecting a similar situation at Gangavaram port and hence are avoiding making any bookings,” a Delhi-based coal importer told CoalMint.

Buyers switch to domestic coal

On the buyers’ side, sponge iron manufacturers who mainly buy from Gangavaram port informed CoalMint that amid increased prices of imported RB2 coal, they are turning to domestic fuel which is cheaper by INR 700-1,000/t.

Although a complete switch over to domestic coal is not possible due to the requirement of high-GCV (gross calorific value) and low-ash, low-sulphur coal for DRI, change in the ratio of domestic to imported coal is possible, which is resulting in increased usage of domestic coal.

Prices at other ports

*Prices are exclusive of cess and GST

As far as other ports are concerned, buyers are looking for May shipments now due to escalated freight rates and the rising API4 index amid supply concerns at RBCT.

CoalMint’s vessel line-up data reveals about 0.84 mn t of coal shipments coming from South Africa between 1-17 April, with the highest quantity (0.17 mn t) for Adani Enterprise coming at Gangavaram port followed by Reliance Industries’ vessel (0.11 mn t) arriving at Hazira port.

What lies ahead?

Analysing the stock position and upcoming vessels data, Adani Enterprise would have the highest stock at Gangavaram port in the coming weeks, resulting in uncompetitive rates for buyers. However, RB2 prices are unlikely to shoot up dramatically despite the rising index due to availability of domestic coal. For other ports, RB2 prices are likely to remain at elevated levels with the arrival of only a limited number of vessels.