As imported South African thermal coal prices continue to trade above the $300/t mark, portside rates of RB2 (5500 kcal/kg NAR) grade coal remained firm at INR 22,000/t at Gangavaram Port.
With limited domestic coal available, sponge iron manufacturers had little option but to switch to high-priced imported coal this week, increasing trading activity as against the last few weeks.
However, deals were largely restricted to small parcels of RB3 (4800 kcal/kg NAR) coal, prices of which were at INR 18,000/t at Gangavaram Port.
Traders, on the other hand, continued to stick to higher RB2 offers at INR 23,000-23,500/t as vessel arrivals from South African remained limited.
As per CoalMint vessel line-up data, only 0.32 mnt of South African coal is scheduled to arrive at various Indian ports till 8 May out of which ONGC Manglore Petrochemical is set to bring 135,000 t at Dhamra Port, followed by Balaji Amines Resources and Adani Enterprise at 75,597 t and 30,000 t respectively.
RB2 portside prices this week
*Price in INR/t, excluding cess and GST
Sponge iron units reduce coal usage
According to market participants, coal consumption volume at sponge iron units have reduced drastically in recent weeks amid an unprecedented domestic coal supply shortage and elevated RB2 coal prices.
With the current price trends of imported coal, the majority of these units continued to lower their purchases despite the monsoon season approaching in the next couple of months.
Thermal coal procurement by sponge iron players typically picks up during this period as coal bought in the rainy season contains higher moisture.
According to market participants, a few large-scale sponge iron manufacturers that had accumulated coal stocks for the coming two months, preferred to delay their procurement plans for the next month seeking further clarity on imported rates in the wake of Europe’s strong coal demand.
Resilient RB1 coal prices
Strong demand from Europe and Asia continues to keep RB1 (6000 kcal/kg NAR) grade coal prices higher at $313/t FOB as on 20 Apr.
Logistics concern across South Africa’s largest rail operator, Transnet declaring force majeure on Richards Bay coal railings last week has raised concerns over the country’s coal export capacity this year.
Under the force majeure, buyers would not be able to penalise Transnet if it fails to provide the decided railings for coal transportation,
Discounts for RB2 coal were assessed at $7/t, while for RB3 (NAR 4800 kcal/kg) discounts were was heard at $26/t.
Outlook
With the rising trajectory of imported coal prices, portside RB2 prices are also likely to gain momentum. However, weak buying appetite of Indian sponge iron manufacturers may cap any further hike in prices.
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