Portside prices of low-CV South African coal remained firm at INR 13,700/t at Vizag Port this week as sponge iron manufacturers continued to close deals amid the expectation of higher finished steel demand for construction activity post-monsoon.
Although, bulk procurement remained lower, small parcel deals continued to take place as DRI producers rebuild stockpiles.
A domestic coal supply crunch this year, especially for the non-power sector, has made sponge iron manufacturers heavily reliant on imports.
Although, elevated prices have weighed on the overall import volumes y-o-y, DRI producers this year have tried out alternate origins, blends of imported and domestic coal more frequently to bring down the operating costs.
Most of the DRI producers are heard to have accumulated coal stock for the next two months. This, however, is keeping in mind their reduced capacity utilisation following the bearish steel sentiment after the government announced export duty on steel and iron ore and pellets from 22 May, 2022.
Majority of DRI producers were heard operating at 60-80% of their capacities.
Region-wise blending ratio
In the Raipur region, DRI manufacturers were largely seen blending South African RB3 with domestic coal sourced from the South Eastern Coalfields Limited (SECL) mines.
VT1 grade Mozambique coal, which is largely being imported by Jindal Steel & Power (JSPL) was being used in the Raigarh region as an alternative to pellet and limestone, prices of which had picked up sharply.
The higher sulphur and ash content in Mozambique coal had limited its usage to only a certain region. This was also the case with Russian supplies as small-and-medium scale producers who were concerned about the feasibility of using high fixed carbon and low VM Russian coal in their kilns as such material becomes harder to ignite and burns more slowly.
However, some major DRI producers in the eastern region were also using the Russian variety, it being relatively cheaper.
In the Odisha region, RB3 and Australian Carmichael 4600 NAR, imported by Adani, were also doing the rounds in 70:30 ratio.
South African RB1 prices lower
South African RB1 (6000 NAR) grade coal prices slipped further by $14/t w-o-w to $294/t on FOB basis amid concerns over its export capacities as state-owned power utility Eskom announced it was facing its worst power outages this year.
Gas prices had picked up sharply after Russian President Vladimir Putin ordered a partial mobilization, indicating no end to the ongoing war.
Outlook
Overall, portside demand for low-CV South African coal is likely to remain buoyant in the upcoming week. However, the increasing presence and viability of alternate-origin coal is also seen keeping RB3 prices within a tight range.
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