Despite the rise in imported South African coal prices this week, portside offers of RB2 (5500 kcal/kg NAR) grade coal remained firm at INR 21,000-22,000/t at Gangavaram Port amid tepid demand by sponge iron manufacturers.
Limited scope of procuring RB2 coal at current elevated price levels continued to result in weak trading activity this week. Bids remained elusive with a few deals being clinched at INR 20,000-21,000/t.
Amid rising coal demand in European countries following renewed sanctions on Russia, RB1 (6000 kcal/kg NAR) grade coal prices have risen to over $300/t FOB.
According to market participants, higher stock accumulation at ports compelled traders to cap any major rise in RB2 offers.
Thermal coal stocks at Gangavaram Port, the largest port to receive South African coal, has seen a sharp rise in inventory by up to 1.1 mnt, an increase of 45% w-o-w mainly due to the weak trading activity.
Traders, however, were unlikely to offer the majority of their stocks currently on expectation of prices rising further in the coming weeks.
With limited domestic coal availability, a few sponge iron makers were heard evaluating whether to procure RB2 coal, but are supposedly waiting for price clarity in the wake of the renewed sanctions on Russia.
RB2 Portside prices
*Price exclude cess and GST
RB1 prices rise, Transnet to declare force majeure
RB1 coal prices rose sharply by $38/t w-o-w to $309/t FOB as on 14 Apr’22 as demand from European and Asian buyers remained robust following the sanctions on Russian coal imports.
Although the implementation of the sanctions is likely to begin after mid-Aug, enquiries from various countries rose sharply.
However, the ongoing logistics disruption in South Africa continues to pose a threat to the country’s export capacity at such a crucial time as Transnet is set to declare force majeure on Richards Bay coal railings.
The country’s largest rail operator is looking to declare force majeure on its “take-or-pay” contracts due to the inability to continue operations seamlessly.
Transnet has notified concerned parties that the ongoing problems of vandalism and wagon unavailability due to legal issues are “beyond its reasonable control”.
Under the force majeure, buyers would not be able to penalise Transnet if it fails to provide the decided railings for coal transportation.
There were no discounts for RB2 coal this month, while the discount for RB3 (NAR 4800 kcal/kg) was heard at $12/t.
Outlook
With the rising trajectory of imported coal prices, portside RB2 prices are also likely to gain momentum. However, weak buying appetite of Indian sponge iron manufacturers may cap any further sharp hike in prices.
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