Portside prices of low-CV South African RB3 (4800 kcal/kg NAR) grade coal prices increased by INR 600/t w-o-w to INR 14,300/t at Vizag Port as sponge iron manufacturers continued making small-scale purchases. Meanwhile, import vessel booking remained limited amid volatile exchange rate.
DRI producers are increasingly blending RB3 coal with high-CV Russian coal and Australian Carmichael coal for sponge iron making for its economical benefits over high-priced RB2 (5500 NAR) coal.
Demand has not increased substantially from DRI producers, but it is still better than what it was two months back, informed market participants.
In addition, the Indian currency has been depreciating against the USD over the last few weeks and has hit a record level of INR 82.2 per USD amid rising oil prices and a firm dollar index.
This currency depreciation has weighed on coal importers as the landed cost of a tonne of RB3 has increased by about INR 1,000/t in a month to INR 13,285 currently (excludes all duties and taxes).
What’s happening in imported coal market?
The high-CV RB1 (6000 NAR) grade coal prices declined sharply by $60/t w-o-w to $254/t FOB.
The fall in prices came as daily enquiries from Europe fell amid high coal inventory levels in the country. The onset of autumn has eased power demand in Europe, while winter inventory of coal and gas are sufficient for the initial days.
South African coal prices that had remained elevated over the last few months were seen adjusting with Rotterdam coal prices. The ICE Rotterdam coal futures prices were trading at $262/t, down $24/t w-o-w as water levels on the Rhine river in Germany were returning back to normalcy.
It may be recalled that weakening water levels on the river had lifted coal prices sharply last month.
There has been limited impact of Transnet’s announcement of force majeure at its ports amid healthy stockpiles at RBCT Port that has allowed vessel loading from RBCT and DBT and MPT ports.
However, market participants fear that an extension to the workers’ strike may soon affect loading and transportation of coal, which may push up RB3 coal delivered prices to India.
Outlook
Portside demand for low-CV RB3 coal is likely to pick up further amid rising manufacturing activity post-monsoon. This coupled with any further currency depreciation may drive portside prices higher.
High-CV South African coal prices may also rebound in the upcoming week if the workers’ protest remains in place. Thungela Resources has already warned against a production halt and has pegged 300,000 t of output reduction this year from its mine.
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