India: Portside trade in South African RB2 dull on bid-offer disparities

Portside prices of RB2 5,500 NAR grade coal rose by INR 500/t this week in line with a sharp rise in RB1 (6,000) NAR prices, prompting sellers to raise their offers.

Although trading activities gained some momentum this week with easing of lockdowns in several parts of the country, prevalent weak demand among sponge manufacturers resulted in a mismatch between the bids and offers.

Portside RB2 grade prices

*Prices in INR/tonne and ex-cess and GST

Majority of the stocks are heard to have been sold out at Haldia and Paradip ports, while old stocks were being sold in Paradip this week.

Sponge iron demand crawls back

Several state governments have started relaxing lockdowns after the decline in the country’s daily Covid case count. With gradual increase in availability of industrial oxygen, several sponge iron manufacturers that were operating at minimum load have steadily resumed operations in Chhattisgarh and Odisha.

After a dull period of more than two week, bids from sponge iron units also started showing up ahead of the monsoon season. However, the volume of procurement from the sponge players is still much lower as against the pre-lockdown period of Mar’21, informed market participants.

“Given the sharp rise in prices this week, we procured less quantity of imported coal than was planned earlier. We are waiting for prices to correct and would procure further after a few days,” said a trader based in Kolkata.

The sharp rise in South African coal prices over the last few months have already compelled several independent sponge iron units to switch over to even high-ash domestic coal. Procuring imported coal considering all operational expenses amid weak sales volumes this year, for such sponge iron plants has become unviable.

Mismatch between bids and offers

At major Indian ports this week, a sharp mismatch between bids and offers ruled market sentiment as buyers were bidding for RB2 coal at INR 7,600-7,700/t whereas sellers remained firm at INR 7,900-8,000/t amid limited stock available at ports.

CoalMint’s stock report reveals, 2.4 mn t of thermal coal stock is available at Gangavaram
Port with the majority being with Adani Enterprises, giving it price advantage over others.

“Most of the days this week, we didn’t receive enough bids. Buyers remained stringent with their bids, while prices are unlikely to correct sharply given the higher freight rates and index,” a Delhi-based trader said.

Rising imported prices lead to tight supply at ports

RB1 (6,000 NAR) prices rose sharply to $111.7/t on 3 Jun’21, up 6.5% w-o-w due to depleting coal stock at RBCT Port amid supply disruptions and increased Chinese demand.

The sharp rise in South African coal prices and weakened demand within the country this year have so far made Indian importers to avoid long-term bookings.

The discounts for RB2 this week moved up by $2/t w-o-w to $19/t and by $1/t for RB3 to $29/t.

Capesize vessel freights between RBCT to Gangavaram continued to remain firm at $16/t.

CoalMint’s vessel line-up data reveals, 1.18 mn t of S. African coal is slated to arrive at Indian ports during 1-16 June’21 with the majority quantity of 0.48 mn t arriving at Krishnapatnam Port followed by Dhamra.

Short-term outlook

In the current scenario, any dramatic correction in South African thermal coal prices seems unlikely in the near-term which would provide support to RB2 portside prices. Also, in the absence of any major quantities coming in and limited availability of S.African coal at Indian ports at present, the same has become a sellers’ market and portside prices are expected to remain elevated.