Portside rates of popularly used South African RB2 5500 NAR and RB3 4800 NAR grades coal recorded a sharp fall this week amidst increased usage of alternate origin coal for sponge iron production.
As per CoalMint assessment, portside prices of RB2 (5500 kcal/kg NAR) grade eased by INR 800/t w-o-w to INR 17,200/t at Vizag Port. Low-CV RB3 (4800 kcal/kg NAR) prices were at INR 15,200/t, down by INR 300/t w-o-w. Prices exclude cess and GST.
With small parcel trades of RB2 and RB3 coal and most of which are reported with impurities in the current market, DRI producers have largely adopted blending techniques with cheaper alternatives from Mozambique, Russia, and Australia.
The imposition of export duty on steel has weighed on the overall procurement demand of DRI producers and sponge iron units have been blending South African coal with other origins.
After various combinations, a key sponge player has claimed that high-CV Mozambique coal (VT-1 grade) can completely replace South African coal. While few sponge units located in the southern part of India are blending RB2 and Australian 4600 NAR grades (low FC but good VM) at a 70:30 ratio for one tonne of sponge iron.
Interestingly, high-CV Russian coal is also finding its place in the Indian sponge iron circuit and is believed to have properties to completely replace South African coal.
“At present, the majority of large-scale sponge iron units are heard to be covered for the next one month, while several Russian and Mozambique coal shipments are lined up post monsoon, which has weighed on South African coal demand this week,” said a reputed DRI manufacturer.
Along with this, manufacturers also avoid booking coal in huge quantities during these times due to moisture accumulation that impacts its combustion properties.
Imported prices rise
After easing slightly last week, high-CV RB1 (6000 NAR) grade prices rose by $20/t w-o-w to $315/t amid strong demand expectation from Europe as its embargo on the import of Russian coal has come into effect this week.
Non-Russian coal imports to European countries – including supplies from Colombia, USA, South Africa, Australia, and Indonesia – reached 18 mnt during January-June 2022, CoalMint data showed.
Interestingly, RB3 (4800 NAR) grade coal offers to India have come down this week and are currently heard at $145-147/t, whereas RB2 (5500 NAR) are at $200-210/t, FOB RBCT Port.
Short-term outlook
Portside prices of South African coal are likely to remain under pressure amid increasing usage of alternate origin coal. However, any major fall also looks unlikely amid limited availability of the same at ports as no major vessel from the country is set to arrive at Indian ports till 23 Aug, CoalMint vessel line-up data showed.
Leave a Reply