Portside trade in South African RB2 (5,500 NAR) thermal coal continued to remain subdued this week as traders refrained from reducing offers due to a surge in landed cost of the material and depleting coal stock at ports.
Bids from sponge iron manufacturers, on the other hand, remained subdued due to weak sales volume and reduced capacity utilisation at present.
Owing to the sharp rise in South African coal prices over the last few weeks, landed cost of RB2 (5500 NAR) in India rose to INR 9,600-9,700/tonne (t). However, amid sluggish demand in the domestic market, direct importers are offering the same at INR 8,600-8,700/t ex-Gangavaram, informed market participants.
Though several mid-sized traders were heard to be offering old RB2 at lower levels of INR 8,300-8,400/t, interest from the sponge iron units in both the cases failed to pull the bids even above INR 8,000/t.
Many sponge iron units in Chhattisgarh, Odisha, and West Bengal are refraining from booking any large quantity of imported thermal coal and resorting to cheaper domestic coal whose availability has increased in 2021.
The blending ratio of imported and domestic coal, which typically stood at 70:30 till last year has now reduced to either 50:50 or 60:40. This change in ratio which involves more of domestic coal over imported, resulted in less yield of sponge iron on per tonne basis but is currently viable amid weak demand for sponge iron.
“Our plant utilisation has almost reduced to 50% amid rise in pellet and thermal coal prices and the procurement of RB2 coal would be viable for us only if it falls back to below INR 7,000/t ex-Gangavaram/Vizag,” said a Raipur-based sponge iron manufacturer.
RB2 coal portside trade prices
| Port | Jul’21 W3 | As on 29 Jul’21 |
| Ex-Gangavaram | 8,000 | 8,100 |
| Ex-Mangalore | 8,600 | 8,800 |
| Ex-Vizag | 8,000 | 8,000 |
| Ex-Paradip | 8,500 | 8,500 |
*Prices in INR/tonne, ex-cess and GST
RB2 offers at Haldia remained higher at INR 10,000/t amid limited stock at the port. However, sponge iron units which earlier used to buy coal from Haldia have now resorted to procuring from Dhamra Port as the same is available at a cheaper rates of INR 8,800-8,900/t ex-Dhamra.
RB1 grade prices rise further
The RB1 (6,000 NAR) grade prices have risen to $133.2/t, up 15% m-o-m, whereas RB2 (5,500 NAR) coal prices are being assessed at $103-104/t, FoB RBCT basis.
Prospects of coal exports from South Africa in the near term have become clouded as a massive cyber-attack last week has compelled the state-owned Transnet Port Terminals to declare force majeure across all container terminals, including Richards Bay and Durban Port.
Coal transport from mines to the port, and discharge of cargoes are heard to be delayed as port divisions are manually tracking containers.
The civil unrest in the country, and the train derailment earlier this month have already weighed on export shipments from South Africa this month.
The discounts for RB2 and RB3 this week are assessed at $19/t and $28/t respectively for Aug’21-loading cargo, while capesize vessel freight between RBCT to Gangavaram is at $18/t.
Short-term outlook
South African thermal coal portside prices are likely to remain elevated in the near-term as sellers are of the opinion that after a few days, sponge iron units would have to accept the raised offers. This is because, switching completely to domestic coal is highly unlikely and imported coal is a must for blending to produce sponge iron. Also, absence of major vessels’ arrival at Indian ports is unlikely to support any correction in portside prices.
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