India: Portside offers for RB2 grade thermal coal rise as index moves up

Key highlights

—The week opened with South African coal price index moving up by $2/t at $65.3/t, against last week’s closing price.

—This has prompted resellers to raise the portside thermal coal offers also by INR 200-300/t against last week’s offers.

Indian Portside offers (in INR/t)

*Prices exclude Cess and GST

Trade deals

—CoalMint learned of a trade deal for 8,000 tonne of RB2 grade thermal coal at Krishnapatnam port for INR 5,100/t by a sponge manufacturer.

—Another sponge player also made a booking for 3,000 tonne RB3 (4800 kcal/kg) grade coal from Gangavaram port at INR 3,850/t.

Indian demand sentiments

—We believe there is no fundamental change in demand in the Indian market, especially from the sponge sector. Thermal coal prices at ports are getting support amid rally in API index.

“Offers have risen at Indian ports as buyers are making panic bookings in anticipation of further price rise. The overall imported coal market sentiments have turned positive over last two weeks as various countries are cutting their domestic coal production to bring in demand-supply balance,” commented a trader based in Delhi.

—The sponge iron prices in India have seen a correction of INR 500-600/t in this week and is currently assessed at INR 18,300-18,500/t ex-works basis in Central and Eastern India. A further correction of INR 100-200/t is expected in the sponge prices in coming days, as per our estimates.

—In case of the cement sector, the buyers are continuing to prefer Australian coal over South African one as the former is still cheaper, despite an increase of $5-6/t in prices.

CoalMint’s Outlook

The API index for today has inched down by $1.3/t and is assessed at $64/t.

In the ongoing scenario, while few participants are anticipating a further price increase in the portside offers for thermal coal amid rise in coal prices from other countries like Australia and Indonesia. However, without any fundamental change in domestic demand and bearish outlook of downstream steel industries, we believe that this price rise would not sustain and will likely fall back to the levels of INR 4,600-4,700/t in the coming month