Portside prices of South African RB2 (5,500 NAR) at Gangavaram Port increased by a whopping INR 4,000-4,500/t in a week’s time as imported coal prices surged in the first half of the week while the domestic coal supply situation in India remained critical.
Interestingly, the second half of the week saw a sudden drop of $30/tonne (t) in RB1 (6000 NAR) grade coal prices as LNG prices observed a correction with the Russian government’s indication of an increase in gas supplies to Europe. Tight supply of natural gas had fuelled bullish sentiments in the coal market. Thermal coal prices rose sharply in the last two weeks as several countries increased their purchases ahead of the winter season.
This chaos in the market forced sponge iron manufacturers to hold their purchases for a day on 7 Oct’21 amidst an expectation of a fall in coal prices. However, imported coal prices recovered on 8 Oct’21, leaving market participants perplexed with very few portside deals concluded.
Sponge iron manufacturers already have limited domestic coal stock left as most of the domestic supply is being directed towards the power plants.
According to Central Electricity Authority (CEA) data, the stockpiles at Indian power plants moved down to 7.37 million tonnes (mn t) as on 6 Oct’21, which is sufficient for an average of only four days usage.
According to market participants, thermal coal procurement by sponge iron plants remains strictly for survival. Coal inventory levels at all the plants are at a critical stage as procurement is being done on need-basis. Demand for sponge iron, on the other hand, also remains lacklustre as the sharp rise in coal prices has further lifted sponge iron prices as well.
RB2 coal portside average trade prices
| Port | Sept’21 W4 | As on 30 Sept’21 |
| Ex-Gangavaram | 13,500 | 18,000 |
| Ex-Krishnapatnam | 13,500 | 18,000 |
| Ex-Vizag | 13,500 | 17,500 |
*Prices in INR/t, ex-cess and GST
Deals concluded
In various confirmed deals collected by CoalMint between 4-8 Oct’21, a total quantity of 45,000 t of RB2 coal has been traded at an average price of INR 17,000/t, ex-Gangavaram this week.
South African prices bounce back
The discounts for RB2 and RB3 grades stood at similar levels as last week’s at $19-21/t and $31/t respectively for Oct’21-loading cargo. Capesize vessel freight from RBCT to Gangavaram remained higher at $29/t.
Short-term outlook
CoalMint believes portside prices of South African thermal coal are likely to remain elevated till the domestic coal supply situation improves in India by mid-October. With China’s robust demand in the runup to the winter months, imported thermal coal prices are also likely to remain elevated.
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