After sharp rises over the last three weeks, South African RB2 (5500 NAR) grade thermal coal portside prices at Gangavaram port have come under pressure in an atmosphere of uncertainty concerning lockdowns in various cities due to resurgence of Covid-19 cases across the country.
While portside prices were rising despite all odds, the second wave of the pandemic resulted in lockdowns in various parts of Chhattisgarh leading to reduced demand and trade activities at ports, impacting RB2 prices that had touched a high of INR 7,100/t recently.
“Buyers, especially from Maharashtra and Chhattisgarh, seem to have stepped back and gone into a wait-and-watch mode, as demand from end users is likely to be severely impacted in the coming days. We don’t see much momentum in the coming days,” Mumbai-based trader informed.
RB2 prices (ex-Gangavaram) averaged INR 6,800/t (inclusive of cess and GST) this week. With Adani Ports and SEZ taking over Gangavaram port recently, a majority of traders have sold their stocks as handling charges have shot up by 30% and number of “free-days” has been reduced.
Market sources informed CoalMint that very few reputed traders would be able to bring in imported cargoes at Gangavaram port (given the affordability) and the rest small and mid-sized traders would have to buy from them.
What’s happening at other ports?
RB2 prices are on the upward curve at Haldia and Paradip ports this week, as no severe Covid-led restrictions have been announced yet in West Bengal and Odisha that could possibly impact sponge iron production. Ex-Paradip prices this week are assessed at INR 7,200/t. Whereas, Ex-Haldia prices are assessed at INR 7,650/t.
For Vizag port, prices are assessed at INR 6,900/t. As per market participants, with less competitive rates at Gangavaram port, buyers are expected to focus on purchases from Vizag. However, not much RB2 is available right now, with only Tata International having RB2 stock at the port.
For Mangalore and Krishnapatnam ports, prices are assessed at INR 7,400/t and INR 7,250/t respectively.
Elevated South African API4 index
South African API4 index is trending at $95/t levels. The index has not seen any major correction in the past two weeks amid shortage of thermal coal at RBCT due to disruption of Transnet’s rail services in Feb ’21.
While repair work in rail services are underway, Indian buyers have taken a step back and are looking for May and June bookings.
The discounts for RB2 this week are heard at $15/t and for RB3 at $26/t whereas the freight rate for a capesize vessel between RBCT to Gangavaram is at $13/t.
What to expect?
According to CoalMint’s analysis, domestic demand is likely to be hit with the fear of the second pandemic wave sweeping across the country. Although the government has imposed night curfew in some States and Union Territories, concerns surrounding health of workers may prompt a reduced number of trades. As a result, further correction in portside prices, especially at Gangavaram, seems likely.
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