The portside prices for RB2 (5500 kcal/kg) NAR coal has remained unchanged this week at INR 5,500/t ex-Gangavaram (exclusive of cess and GST) as there is sufficient material available at port (around 2.95 mn t). There is no panic buying from domestic sponge sector amid falling prices.
Supply situation normalized in S.Africa
Last month, API4 index prices had shot up as the maintenance work at RBCT port which was originally planned for eight days was extended for another week keeping it shut for fifteen days. This has resulted in shortage of material at RBCT port.
In addition to this, colder weather and domestic coal shortage in China had forced buyers there to opt for South African coal resulting in lesser vessels coming to India. The impact of above factors was subsequently seen in Indian market, when buyers made panic buying in anticipation of coal shortage leading to increase in portside coal prices.
However, now when supply situation has normalised in South Africa and demand from China has diminished ahead of Lunar New Year Holidays, API4 index has recorded a drop of USD 7/t w-o-w basis. Subsequently, the Indian sponge manufacturers buying South African coal have also taken a backseat and are making spot bookings from the port as per their requirements.
Impact of Union budget
In addition to this, Union Budget that was announced on 1 February (Monday) didn’t have any significant impact on the coal prices. This is because while government has reduced customs duty on coal imports from 2.5% to 1%, it has consequently introduced AIDC (Agriculture Infrastructure Development Cess) of 1.5%, thus having negligible impact on the overall cost of imported coal.
In steel sector, government has reduced import duty on steel and scrap, resulting in a fall in steel and sponge iron prices subsequently. Sponge iron prices have seen a correction of INR 200-600/t w-o-w basis.
According to market participants, coal buyers from sponge sector are waiting for some clarity in sponge prices resulting in limited trades for RB2 coal at port. Also, API4 index would see some action only post 15 February (after Chinese holidays). At present discounts for imported RB2 grade coal are heard at $12-13/t whereas for RB3 the same are $20-21/t.
The prices for RB2 coal ex-Haldia are heard at INR 6,400/t and Krishnapatnam port the same are at INR 5,700/t. Prices are exclusive of cess and GST.
Outlook
Market participants believe that portside prices would not see any dramatic change for few days in the present scenario when domestic demand is sluggish and global coal sentiments are also negative due to upcoming Chinese holidays. However, post that, price recovery in both domestic and international coal prices is being anticipated.
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