India: South African RB2 portside prices continue to rise on tight supply

Portside prices for South African RB2 5,500 NAR grade coal in India continued to trade at higher levels this week due to limited stock at ports.

However, demand continued to remain under pressure due to Covid-led curbs in  most of the states.

Portside RB2 coal prices this week          

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

Limited supply at ports

With majority of the stocks being sold out, especially at Haldia and Paradip ports, and arrival of limited volumes from South Africa due to resilient freights, portside stocks in India remained lower, resulting in increased prices despite muted demand.

CoalMint’s vessel line-up reveals around 0.72 million tonnes (mn t) of South African coal coming to Krishnapatnam, Dhamra, and Kandla ports between 18-31 May’21 in capesize vessels.

At Gangavaram Port, a contrast in RB2 offers was observed depending on how recent the material was.

While the latest-arrival stock has been offered  at  INR 7,550–7,600/t, this week, old stock have been sold at lower rates of INR INR 7,100-7,100/t.

At Haldia and Paradip ports, majority of the stocks are heard to be sold out, while 0.20 mn t and 0.10 mn t of coal were available at Mangalore and Vizag ports, CoalMint notes.

Demand weakens despite approaching monsoon 

Bids from sponge iron manufacturers remained largely muted this week. In fact, monsoon procurement volumes from major sponge manufacturers were much less this year as compared to last year,  market participants informed.

Typically, sponge manufacturers tend to stock coal during the summer months  of April and May. However, due to fall in capacity utilisation at sponge plants and anticipation of lower sales this year, several sponge units preferred to adopt a wait and- watch policy  and held on to their booking  on expectations of a price drop or improved supply of domestic coal.

Moreover, rising labour shortage amid the partial or complete lockdowns in most states also  kept industrial activities under pressure.

Fall in API4 index seen to be short-lived 

The API4 index corrected marginally this week and is currently assessed at $102/t against $103.85/t seen last week.

However, industry experts believe that South African coal prices would remain  escalated going ahead amid increased South African coal bookings from China (despite the issue of trace elements) to fill the void of Australian coal imports in the country.

The discounts for RB2 and RB3 coal this week remained unchanged at  $15t and at$25/t respectively.

The capesize vessel freight between RBCT port to India corrected this week by $6/t week-on-week (w-o-w)  $18/t.

Short-term outlook

CoalMint believes that increased availability of oxygen at steel plants and relaxation of Covid curbs in the coming days would result in demand pick-up for RB2 coal from sponge iron units. However, limited coal stock at ports  and the approaching monsoon season that impacts supply of domestic coal,  would provide support to RB2 coal portside prices in the near -term.