India: Portside RB2 prices remain stagnant as buyers resist higher offers

South African imported coal prices for April contract that dropped at the start of this week bounced back towards the end, but its impact on Indian portside trade remained limited.

This was because Indian sponge iron manufacturers, the major buyers of South African coal, have moved to the sidelines amid surging portside prices and volatile market conditions.

“Independent sponge iron manufacturers are finding it difficult to carry on with their operations amid rising raw material costs. Also, end-users are not ready to accept higher prices, resulting in a reduction in plant utilisation levels up to 50%,” said a sponge iron manufacturer based in Raipur.

Sponge iron manufacturers are preferring to buy domestic coal over the imported material and the blend ratio of the two has changed from 70:30 (imp:dom) to 20:80, informed market participants. Domestic thermal coal prices for 5000 GCV coal in resellers market have been assessed at INR 14,250/t ex-Bilaspur this week.

Sponge iron prices (PDRI) have come down by INR 4,000/t from its highs in mid-March and are assessed at INR 45,000/t, ex-Raipur basis.

RB2 portside prices

Prices in INR/t, ex-cess and GST

RB1 prices remain volatile

After falling up to $223/t FOB at the start of the week, South African RB1 (NAR 6000 kcal/kg) grade prices rose up to $270/t FOB as on 23 Mar’22. This volatility is being attributed to Russia’s decision to supply gas to the EU only in Russian currency, ruble, which has led to a rise in global gas prices and subsequently coal demand from South Africa has risen.

The discount for RB2 coal was heard at around $5/t this week, while that for RB3 (NAR 4800 kcal/kg) was heard at $10/t.

The coal stock at Richards Bay Port has risen by 7% w-o-w basis and is assessed at 2.21 mnt, but still lower than the average of 5 mnt during pre-Covid times.

Outlook

The South African coal vessels booked in March at an average index of $350/t, are expected to arrive in April and portside prices of RB2 coal are expected to stand at around INR 26,000/t. Meanwhile, buyers seem to be adamant to accept these rates but it would be a challenge for sellers to achieve sales at these rates wherein reluctance is seen even at INR 21,000-22,000/t levels.