India: RB2 portside trade muted on sluggish demand from sponge iron units

Portside trade in South African RB2 (5,500 NAR) grade coal remained largely muted this week amidst sluggish demand from sponge iron manufacturers.

However, a few traders were heard to be liquidating their stocks at lower rates of INR 7,700-7,800/tonne (t), against the average offers of INR 8,300-8,400/t.

Increased plot rent and demurrage charges as well as the rising moisture content during the ongoing monsoons have compelled small and mid-sized traders to sell their material at lower rates. However, given the supply scenario in South Africa and higher freight rates, direct importers having stocks are preferring to uphold their offers, on expectation of a further price rise, informed market participants.

RB2 coal portside trade prices

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

RB2 offers at Gangavaram and Vizag ports stood firm at INR 8,400/t while at Mangalore Port, offers were at INR 8,600/t. However, hardly any trade was reported at these levels.

Sponge iron units stay on sidelines

Demand from sponge iron units continued to remain under pressure as most plants reeled under higher prices of iron ore, and weak sales volumes.

Over the last one month, most sponge iron units have shifted to blending cheaper domestic coal with imported to continue operations.

“In the current market situation, the raw material costs (of both iron ore and coal) are very high whereas domestic demand is quite sluggish, making it difficult for steel manufacturers to pass it to the end-users. These costs are making survival of independent units quite difficult,” said a Raigarh-based trader.

Moreover, most of the large sponge iron units are also heard to have accumulated sufficient stocks till the next two months to avert any damage and price fluctuations, informed market participants.

South African coal stocks at major ports remains tight as only few importers are scheduled to bring their vessels this month.

CoalMint’s vessel line-up data reveals, around 0.74 million tonnes (mn t) of South African coal is slated to arrive at Indian ports between 12-19 Jul’21 with maximum quantity of 0.23 mn t being brought in by Adani Enterprise, while the rest of the quantity is for the end-users.

Supply concerns in South Africa

Massive riots in South Africa’s KwaZulu-Natal (KZN) province has compelled Transnet Port Terminals to declare Force Majeure at Richards Bay Coal Terminal and other ports this week until further notice. The scheduled annual maintenance also has been postponed by another week to 20-26 Jul’21 by Transnet Freight Rail (TFR).

This has lifted RB1 (6,000 NAR) grade coal prices to $120/t for Jul’21 as against $117/t last week. For Aug’21, RB1 coal price has risen to $126/t.

The discounts for RB2 and RB3 this week are assessed at $16/t and $25/t respectively for Aug’21-loading while the cape-size 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. Continued disruptions in port operations, and an extension of the annual maintenance schedule may also fuel supply disruptions in South African coal exports.