India: South African RB2 portside prices rally amid limited stock and rising index

Portside prices for South African RB2 (5,500 NAR) grade coal rose further by INR 500/tonne week-on-week  (w-o-w) across major ports. Limited stockpiles at ports, rising API4 index and escalating freight rates are compelling traders to raise  prices.

Portside RB2 coal prices 

*Prices in INR/t and ex-cess and GST

Demand-supply situation at ports

Bids from sponge iron manufacturers rose slightly this week as compared to last week as buyers resumed bookings of RB2 coal ahead of the monsoon season.

In contrast, at Gangavaram Port,  small traders sold their stocks at lower rates of INR 6,900-7,000/t in an attempt to clear their old inventory, while large importers sold recent material at higher rates of INR 7,500–7,550/t.

At  Haldia and Paradip ports, majority of the stocks are heard to be sold out with no new upcoming vessel, as per CoalMint’s vessel line-up data. On the other hand, a combined quantity of 0.56 mn t of South African coal is expected to arrive at the Indian ports of Dhamra, Gangavaram, Mangalore, and Gopalpur between 12-22, May.

Factors like partial/ complete lockdowns, rising labour shortage, and weak demand have kept industrial activities  under pressure, especially in the states of West Bengal, Maharashtra, Gujarat, and Chhattisgarh.

Surging API4 index discourages import bookings

The sharp rise in the API4 index and the new Covid protocols at RBCT  and Indian ports have already dented several Indian importers from making any large bookings.

The South African API4 index has registered a rise of 7% w-o-w  to close at $103.9/t on Thursday. This increase is mainly triggered by:

• Shortage of RB1 (6,000 NAR) at RBCT.
• Transnet’s rail lines not working in full capacity after the derailment on 28 April.
• Increased buying from Chinese utilities amid surging domestic demand.

The most traded thermal coal futures at China’s Zhengzhou Commodity Exchange closed at RMB 906.80/t ($140.9/t), after rallying 34% so far this year. The sharp rise in  prices further compelled the exchange to raise trading fees to cool the markets.

The discounts for RB2 and RB3 coal this week were assessed at $15/t and at $25/t respectively whereas freight between RBCT to Gangavaram Port for capsize vessel is assessed at $24/t.

Force Majeure at Indian ports

With the effective lockdown in most of the Indian states , port authorities have imposed Force Majeure at Gangavaram, Vizag, Karaikal, and Gopalpur ports to curb the rising infection rate.

Under this new regulation, while the port authorities would be relieved from any contractual obligations such as delays, demurrages and related costs arising under any situation, port operations would continue with limited resources and at a slower rate.

Thermal coal imports at the four ports facing Force Majeure

Qty in mn t

Short-term outlook

As per CoalMint’s analysis, with limited availability of coal at ports and several ports are under Force Majeure, the rally in RB2 coal prices is less likely to lose steam.