Portside trades in South African thermal coal slowed down as sponge iron manufacturers avoided taking any major bookings ahead of the Diwali festivities.
Prices of low-CV South African RB3 (4800 kcal/kg NAR) grade were firm at INR 14,300/t at Vizag Port. No major trade was heard in the mid-CV RB2 (5500 kcal/kg NAR) category due to lower demand among DRI producers.
Rising availability of Russian and Australian Carmichael coal has dampened demand for South African RB2 coal which is increasingly being blended with the former two origins by Indian sponge makers. As per a large-scale sponge iron producer, the blending ratio of RB2 and high-CV Russian coal is at a 60:40 ratio.
Several sponge iron producers were heard to have accumulated sufficient coal stock for the next two-three months and have been making only few small-scale purchases.
A volatile exchange rate, on the other hand, has led to lower vessel bookings, 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 (excluding all duties and taxes).
The Indian currency has been depreciating against the dollar (USD) over the last few weeks and has hit a record low of INR 83 amid global uncertainty.
RB1 prices weak amid lower European demand
High-CV RB1 (6000 kcal/kg NAR) grade coal prices were lower at $248/t, down by $66/t so far this month.
Weak European buying interest for South African coal had offset concerns of a supply disruption last week amid the Transnet Union workers’ strike.
Although Transnet has reached an agreement with the union for a three-year wage deal, a locomotive derailment is being heard on Transnet’s main line to RBCT Port which is affecting coal deliveries.
Ports at Europe are heard to be full of inventories for the upcoming winter season. However, market participants also remained concerned over the extent of winter this year and the subsequent demand.
Outlook
Portside demand for low-CV RB3 coal is likely to remain muted amid festive holidays. Trading activity is expected to revive by the end of next week as a total of 0.4 mnt of South African coal is set to arrive at Indian ports, CoalMint data showed.
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