Portside trade of South African RB2 (5,500 NAR) grade coal remained lacklustre this week as elevated prices dampened the buying interests of sponge iron manufacturers .
A rise in RB1 (6,000 NAR) grade imported coal prices compelled traders to keep portside prices higher despite weak demand from buyers. Dull sentiments also spilled over into RB3 (4,800 NAR) coal sales this week as very few deals were heard so far.
RB2 coal weekly average portside prices
| Port | Jun’21 W3 | Jun’21 W4 |
| Ex-Gangavaram | 8,000 | 8,000 |
| Ex-Mangalore | 8,100 | 8,100 |
| Ex-Vizag | 7,950 | 8000 |
| Ex-Paradip | 8,400 | 8,500 |
*Prices in INR/tonne and ex-cess and GST
Only limited stocks are available for portside trade at Haldia Port as no new vessels are arriving since the past one month due to escalated freight rates.
Tepid demand from sponge iron sector
Domestic steel demand in India turned sluggish, especially in the past few weeks, on the back of localised lockdown restrictions in many states of the country that weighed on steel prices.
Market grapevine is that induction furnaces (producing semi-finished steel) in the Raipur region have decided to operate at 50% capacity in Jul’21 amidst burgeoning losses. Some furnaces could even shut down completely if the situation worsens.
In the wake of escalated raw material (pellet and iron ore) costs and sluggish end-user demand, increased production for sponge iron manufacturers has become unviable, which is impacting their thermal coal demand.
Portside prices firm despite sluggish demand
Despite weak demand from sponge iron manufacturers over the last few weeks, port side prices of RB2 grade coal remains firm.
The reason is limited availability of imported thermal coal stocks at Indian ports. Due to higher freights, Indian importers have resisted from booking large volumes in the past two months thereby providing support to RB2 prices.
According to CoalMint’s vessel line-up data, about 0.80 million tonnes (mn t) of thermal coal is arriving at Indian ports till the end of this month. A majority of the material (0.33 mn t) is for Adani Enterprise arriving at Gangavaram and Dhamra ports. The rest of the imported volume are for end-users mainly in the power sector.
South African coal prices continue to rally
After a pause last week, South African RB1 (6,000 NAR) grade coal prices rose further to $116.1/t, up by $2/t w-o-w.
The discounts for RB2 and RB3 this week are assessed at $17/t and $25/t respectively for Jul-loading while capesize vessel freights between RBCT to Gangavaram continues to remain firm at $17/t.
What lies ahead?
CoalMint believes that any major correction in South African thermal coal port side prices seems unlikely in the near-term despite sluggish demand. Limited availability at ports and the seasonal factors in India would impact domestic supply of high-calorific (CV) coal that is already in short supply.
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