India: Disparity in RB2 portside offer as some traders try to liquidate stock

Portside trade in South African RB2 (5,500 NAR) grade coal gained some strength this week compared to the last three weeks, as a few traders were heard to be liquidating their stocks amidst persistent sluggish demand.

On the other hand, few traders raised their offers by INR 300-400/t amidst increasing imported RB1 (6,000 NAR) prices due to Transnet’s train derailment at one of the Eastern Cape stations.

Amid sluggish demand, increased plot rent and demurrage charges, few traders do not want to burden themselves and are selling their material at lower prices against offers. However, the ones with financial capacities to bear this are insisting on holding their stock in anticipation of further price rise, expected next week when Transnet would shut down for annual maintenance its rail line connecting RBCT, informed market participants.

RB2 coal portside trade prices:

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

RB2 offers at Gangavaram and Vizag ports were raised to the levels of INR 8,300-8,400/t whereas at Mangalore also the same rose to INR 8,400/t. However, hardly any trade was  reported at these levels.

Sponge iron units avoiding bulk bookings

Coal demand from sponge iron units continued to remain under pressure and plants were heard to be buying in small quantities of 2,000–5,000 tonne against the usual trend of bulk buying. This is because the demand outlook for steel continues to remains dull and sponge iron units’ piled-up inventory is still not being consumed by buyers from the steel sector.

In an attempt to continue operations, sponge iron units have been focusing more on blending cheaper domestic with imported coal.

Further, South African coal stock at major ports also remains tight as only few direct importers are scheduled to bring their vessels from the country.

CoalMint’s vessel line-up data reveals, around 0.56 million tonnes (mn t) of South African coal is slated to arrive at Indian ports between 6-18 Jul’21. Adani Enterprise is set to bring 0.27  mn t at Gangavaram, Marmagao and Krishnapatnam ports, while 0.16 mn t is set to arrive for IMR Resources at Vizag Port.

Transnet derailment increases RB1 prices

After witnessing minor fluctuation over the last two weeks, South African RB1 (6,000 NAR) grade coal prices rose to $117/t on 7 Jul’21, against an average of $115/t last week.

A 31-wagons coal train was derailed at Dassiehoogte in the Eastern Cape region of South Africa on 3 Jul’21 resulting in closure of two rail lines.  Although Transnet Freight Rail has reopened rail line 2 of RBCT, line 1 continues to remain closed, affecting coal supplies to RBCT.

Coal stocks at Richards Bay stood at 3.4 mn t last week, down 6% from the previous week. However, market participants expect supply tightness to rise at RBCT as the minimum quantity of 5 mn t of coal that is required to be stored ahead of the rail network’s scheduled annual maintenance from 13-19 Jul’21 may not be maintained this year because of several derailments.

The discounts for RB2 and RB3 this week are assessed at $18/t and $28/t respectively for Jul’21-loading while capesize vessel freight between RBCT to Gangavaram is at $18/t.

Short-term outlook

CoalMint believes South African thermal coal portside prices are likely to remain elevated in the near term on depleting stocks at the ports. But any significant rise is possible only when imported RB1 prices goes up substantially due to Transnet’s annual maintenance shut-down.