Portside trade deals for South African RB2 (5500 kcal/kg NAR) grade coal at Indian ports have reduced dramatically as buyers continue to quote lower rates while sellers are adamant on offering higher at INR 22,500-23,000/t, ex-Vizag.
Indian sponge iron manufacturers, who had largely kept to the sidelines, are back but procuring RB3 (4800 kcal/kg NAR) coal, and even opting for high seas bookings rather than spot purchases. Amid elevated imported coal prices, sponge iron units have largely opted for imported and domestic coal blends (imported being in smaller ratios).
RB3 grade has lower carbon content over RB2. However, the fact that it is still cheaper by INR 3,000/t, makes sponge iron manufacturers opt for it to keep their plants running at minimum levels.
Sponge iron units are heard to be cutting down their capacity utilization levels because of unviable coal costs. On the demand side, sponge iron prices have come down because of sluggish end-user demand amid record-high inflation in the country.
“Majority of the independent plants are in temporary shut-down mode, while the larger ones are working under a 40% capacity utilisation. Given the weak domestic demand for sponge iron in the market, procuring coal at such higher rates is not workable,” a reputed sponge iron manufacturer said. The price for P-DRI sponge iron is currently assessed at INR 34,600/t exw-Raipur, down by INR 1,500/t w-o-w.
Domestic coal supplies
*Qty in mnt
CIL’s coal dispatches to the non-power sector have declined by 22% y-o-y to 37.4 mn t during Jan-Apr’22, while supply to the power sector have increased to 64% y-o-y to 280.2 mnt during this period in a bid to rebuild sufficient invetory during the summer season, official data showed.
South African vessel arrivals remain limited
Amid the logistic constraints in South Africa, thermal coal vessel arrival from the country has declined sharply in the last few weeks.
As per CoalMint’s vessel line-up data, South African vessels, laden with 0.5 mnt of coal, are set to arrive at various Indian ports between 13-24 May, 2022.
Shipments for end-users remain the highest as ArcelorMittal Nippon Steel is set to bring 0.16 mnt at Hazira Port, followed by Visa Steel and Tata Power at 55,000 t each.
A capesize vessel carrying 0.15 mnt at Vizag Port has arrived for Tata International today, the data showed.
Logistic woes lift RB1 prices by $17/t
RB1 (6000 kcal/kg NAR) grade coal prices have risen by $17/t w-o-w to $328/t as on 12 May amid cargo shortage at RBCT Port.
As poor maintenance work, cable theft, and vandalism continue to affect shipments via railways, miners are deploying about 400 trucks per day to speed up road transportation of coal.
However, the same is also cost-intensive by four times more compared to rail, especially at the current higher fuel rates.
This comes at a time import demand remains robust from Europe, and major Asian countries have imposed sanctions on Russia.
The discounts for RB2 and RB3 (4800 kcal/kg NAR) for May are assessed at $9/t and $29/t, respectively.
Short-term outlook
Sellers are expected to keep portside offers high as long as the imported prices remain elevated. A downward correction is only possible if RB1 prices eases. Meanwhile, buyers would continue to use more of RB3 coal unless any major changes occur in the import market.
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