South African RB2 (5500 kcal/kg) coal prices at Indian ports recorded a drop of INR 200-250/t w-o-w basis, post the New Year holidays. The falling API4 index ($4/t against last week of December) coupled with high stock at ports and tepid demand has led to lower RB2 portside prices.
Our analysis reveals that although the sponge iron prices in India have remained firm in the past one month (up by INR 100-150/t m-o-m), this is more so because of rising iron ore and billet prices rather than any increase in demand. The current prices for Pellet Sponge Iron are at INR 26,400-26,500/t.
In addition to this, the thermal coal stock at Ganagavram port (receiving 40% of South African coal imports) is reported to be around 3.13 mn t up by 4% w-o-w basis. This is higher than the entire thermal coal stock of 3.09 mn t available at RBCT port in South Africa.
Panic selling in the domestic market
As per CoalMint, RB2 prices are assessed at INR 5,500 for bulk purchase and 5,600/t ex-Gangavaram for smaller quantity (prices are exclusive of cess and GST). However, few traders in the market are not ready to sell below INR 5,700/t at present citing no irregularities over the committed grades.
However, the key issue highlighted by the coal sellers is that although the landed cost of importing RB2 coal is higher, while the same is being traded at lower rates at the ports.
“The disparity between the landed cost of coal and portside prices for BR2 coal at present is as high as INR 500-600/t as the demand from sponge sector is not picking up as expected”, commented a trader based in Raipur.
He further added that the stocks at Ganagavram port is quite high which is making sellers panic and sell at lower levels in anticipation of a further price plunge.
In addition to this the increased availability of domestic coal in India is posing as a obstacle to imported coal prices picking up. As per market reports, CIL’s coal sales via e-auctions for FY21 (ending Mar’21) is projected to be all time high at 120 mn t against 66 mn t in FY20.
Outlook
CoalMint has learnt from its sources that the South African government is mulling level four lockdown in the country amid rising cases of new strain virus. In case this happens there will be supply tightness of coal from S.Africa. Subsequently, there would be panic buying of RB2 coal at Indian ports which would lift its prices in the near term. However, in case level 4 lockdown is not imposed in the country, the portside prices are anticipated to remain weak in the upcoming days.
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