Portside South African coal prices continued to rise this week amidst elevated imported prices. However, trading activity remained weak amid limited availability of ready stock at the key ports.
According to market sources, the majority of sellers are making high-sea sales as the vessel arrival from South Africa has slowed down.
“RB2 coal availability is so short that vessels are sold out before arrival at ports. Buyers are making advance bookings at index-linked rates. The market has completely turned into a sellers’ market,” said a reputed trader based in Delhi.
A total 0.60 mnt of thermal coal from South Africa has arrived at Indian ports during 13-17 Feb’22 majorly by end-users, wherein no vessels arrived at Gangavaram, Krishnapatnam, and Mangalore ports, CoalMint data shows.
The limited stock available were heard to be sold at INR 16,200-16,300/t at Vizag Port while a few trades were heard at Haldia.
RB2 portside prices this week
Prices in INR/t, ex-cess and GST
Sponge iron units face the heat
Elevated imported coal prices and limited supply of domestic coal have again disrupted supply to the sponge iron industry as the majority of the players were heard to be operating at a reduced capacity.
Sponge iron prices in the last three months have risen by more than 16% whereas on w-o-w basis, the same were up by INR 400/t.
Coal India and its subsidiaries continue to divert their majority supplies to the power sector ahead of the summer season. The current inventory levels with power producers are assessed at 26 mnt, sufficient for 12 days, as on 15 Feb’22, data from the Central Electricity Authority showed.
Domestic coal dispatches by Coal India and its subsidiaries to the non-power sector have been under pressure in the last few months as dispatches for the sponge iron sector fell by 11% m-o-m in Jan’22 to 0.63 mnt.
Resilient South African coal prices
The geopolitical tension between Russia and Ukraine continues to keep gas prices high, subsequently supporting South African coal prices as RB1 (6000 NAR) grade prices are at $198/t FOB, up by $3/t w-o-w and by $33/t m-o-m.
Several European countries were heard to be booking South African coal amid the expectation of tight LNG supply from Russia.
RB2 coal continues to be offered at a premium of $5/t, while the discount on RB3 (4800 NAR) is assessed at $5/t.
Short-term outlook
CoalMint believes portside RB2 prices are likely to remain elevated amid the tight inventory levels at Indian ports. Also, the majority of vessels for Mar’22 arrival have already been booked. In case Russia-Ukraine tensions are resolved, imported prices for South African coal prices would not see a major correction amid prolonged transportation issues at Richards Bay Coal Terminal.
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