South African coal demand from its key buyer, India, has eased considerably following a sharp decline in domestic steel prices after the government imposed a 15% export duty on steel.
While high-calorific value (CV) RB1 (6000 kcal/kg NAR) grade coal bookings are being made for the European markets, prices of low-CV RB3 (4800 kcal/kg NAR) have declined sharply despite the material’s higher relevance in the Indian market.
Interestingly, prices of RB2 (5500 NAR), that were also being diverted to the European market, have now seen a significant downtrend in the past one week amid lower demand in the Continent.
As per market participants, July-based RB2 cargo from RBCT Port is currently heard at $185-190/t FOB basis, which was trending at $225/t till last week. RB3 offers, on the other hand, have seen a bigger fall of $40-45/t w-o-w to $135/t FOB.
High CV RB1 (6000 kcal/kg NAR) grade prices, however, are higher at $300/t FOB, mainly due to Europe’s buying appetite. Prices have eased by $23/t on a weekly basis as the two rail tracks at RBCT re-opened following a derailment of 14 wagons from a 100-wagon train earlier this month.
Portside offers in India ease
The limited buying appetite from the sponge iron sector has compelled traders to bring down portside RB2 offers. These are assessed at INR 17,500-18,000/t at Gangavaram Port, down by INR 5,500/t since the introduction of the steel duty in the third week of May, CoalMint’s assessment noted.
However, procurement in this segment has largely been muted due to the unviability of running operations at these prevalent rates.
Mostly small parcel deals were noted in RB2, with three rakes heard booked at INR 18,000/t at Gangavaram Port.
There is an increased inclination among Indian sponge buyers towards RB3 due to its rather competitive prices of INR 13,800-14,5000/t at Gangavaram and Vizag ports.
According to market participants, declining operating margins have kept portside trade of South African coal muted as buyers continue to anticipate further correction in coal prices in the upcoming week.
PDRI sponge iron prices continue to trade lower at INR 30,600/t exw-Raipur, down by INR 400/t since last week, and by INR 4,100/t m-o-m.
Vessel arrival
As per CoalMint’s vessel line-up data, a total of 0.5 mnt of South African coal shipments are set to arrive at Indian ports. Out of these, Adani Enterprise is set to bring the highest volume of 0.14 mnt at Gangavaram and Dhamra ports, followed by Swiss Singapore at 0.12 mnt at Gopalpur Port.
Short-term outlook
South African coal demand from India is likely to remain under pressure amid declining steel prices in the domestic market. A further fall in RB3 is also likely if Indian demand continues to remain subdued.
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