India: Portside prices of South African coal retreat amid increased domestic coal availability

Demand for South African thermal coal from Indian sponge iron players slowed down once again this week with portside prices retreating by INR 200-300/t w-o-w. The price for RB3 (4800 NAR) grade coal is currently assessed at INR 12,700-12,800/t ex-Gangavaram.

While sponge iron prices rose by INR 900-1,200/t w-o-w and are currently assessed INR 31,000/t exw-Raipur, the positive movement in sponge prices failed to have any impact on RB3 portside prices.

This was majorly because of cheap and increased availability of domestic coal. According to market participants, washed domestic coal with 42% FC (fixed carbon) is available to sponge iron producers in Chhattisgarh at INR 11,000/t. Producers are heard to be blending domestic and imported coal in the ratio of 60:40.

Domestic coal output

India’s domestic coal production has gained pace especially post monsoons this year as the government targets to achieve 900 mnt of coal production in FY23 (till March’23).

India’s coal production in the last three months, September-November has risen by 9% to 200 mnt against the previous three months (June-August). Similarly, dispatches to the non-power sector has gone up by 7% to 31 mnt during the period.

Along with domestic coal being used by sponge iron players in the eastern belt, manufacturers in the south are opting for blend RB3 coal with Australian 4600 NAR coal, which is ultimately impacting portside demand for South African coal.

Import prices remain rangebound

Despite elevated RB1 prices, offers for RB3 remained the same at $140/t CNF India from non-RBCT port for January laycan and $145/t from RBCT port for January-end laycan.

While there is not much interest for RB2 (5500 NAR) coal, the indicative offers were heard at $165-170/t CNF India from RBCT port.

According to CoalMint’s vessel lineup data, a total of 480,000 t of South African thermal coal is expected to arrive at Indian ports between 1-17 December, with the highest quantity of 160,000 t being booked by Rashmi Group and 140,000 t by Adani Enterprise.

Near-term outlook

South African portside coal prices are expected to be in a similar range in December on the expectations of buoyant domestic coal supplies coupled with steady sponge iron demand.