India: Portside trade in South African RB2 grade muted amidst cyclone

Portside trading activities for South African RB2 5,500 NAR grade coal at Indian ports remained limited this week amidst cyclonic storm Yaas making its landfall on the eastern coast of India. This led to portside prices remaining unchanged on a week-on-week (w-o-w) basis.

Inclement weather resulted in suspension of operations at Haldia, Gopalpur, Dhamra and Paradip ports for two days, while Gangavaram and Vizag ports saw very limited trades due to mismatch in bids and offers.

Portside RB2 grade coal prices

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

In fact, majority of the stocks are heard to have been sold out at Haldia and Paradip ports.

Sponge iron manufacturers opt for domestic coal

Bids for imported coal from sponge iron manufacturers based in Chhattisgarh were heard to be quite less as many are shifting to domestic coal.

Amidst the sharp rise in Covid-19 infections in the country, sponge iron manufacturers are anticipating lower sales volumes this year, which thereby justifies their reduced interest in higher imported coal prices.

“Large sponge iron plants do not want to lock in their money in imported coal given the escalated freight rates and API4 index. They are waiting for correction in both and are switching to domestic coal due to its increased availability and cheaper rates,” said a reputed trader based in Kolkata.

In case of smaller sponge iron units, many that were shut down in April due to lockdown restrictions and oxygen shortage, have not yet resumed their production amidst labour shortage but are expected to do so from June.

“At Gangavaram Port, buyers are bidding for RB2 coal at INR 7,200-7,300/t whereas sellers are not ready to go below INR 7,500-7,600/t as they are already selling at a loss,” said a trader based in Raipur.

Gap between domestic and imported coal prices

In South Eastern Coalfields Limited’s (SECL’ss) latest auction, the bid price for G6 (GCV 5,500-5,800 kcal/kg) was assessed at INR 4,000/t whereas that for G5 grade (GCV of 5,800-6,100 kcal/kg) was averaged at INR 4,400/t.

Subsequently, the difference between portside and domestic coal (ex-plant basis) prices after adding all duties and taxes comes to around INR 2,000-2,500/t.

API4 index, vessel freight continues to ride north

After correcting marginally last week, the API4 index rose again to $105/t this week amidst increasing demand for South African coal from China and Transnet’s rail issues still not being resolved.

The discounts for RB2 and RB3 coal this week have been assessed at $16.5/t and $27/t respectively, up by $1-2/t w-o-w.

Capesize vessel freights between RBCT to Gangavaram continued to remain buoyant at $17/t whereas panamax freight rates between RBCT to Haldia port are heard to be at $30/t.

Short-term outlook

CoalMint believes that with easing of lockdown restrictions from June and resumption of plants’ operations, trading activities at ports will pick -up in the upcoming weeks. However, any major support to portside RB2 coal prices seems less likely due to the increasing preference for domestic coal by sponge iron units.