Even as alternative coal blends are ruling the roost for domestic sponge iron manufacturing, portside trades of South African RB2 coal declined sharply, as buyers preferred low-CV RB3 bookings due to relatively cheaper cost.
Mid-CV RB2 (5500 kcal/kg NAR) grade, which has been the most preferable and popular for DRI production, has become less attractive amid elevated prices of INR 17,000/t at Vizag port, as against INR 13,700/t for RB3 grade.
According to market participants, Indian DRI producers are finding it more economical to blend Russian 6000 NAR grade coal with low-CV RB3 (4800 NAR) material, as its fixed carbon and volatile matter ratio fits perfectly, as a sponge iron manufacturer source explained.
A few small-scale units, however, were heard blending RB3 and Australian Carmichael 4600 NAR, supplied by Adani in a 70:30 ratio. However, the 18% ash content of Australian coal remains a concern for DRI producers.
“The fixed carbon cost of using Russian coals is much lower as against using other blends with RB3, which makes it attractive. We are getting bulk vessels every month as our capacities are now running at their optimum levels,” a sponge manufacturer said.
Thermal coal procurement by sponge iron manufacturers has risen in recent weeks amid strong demand expectation during the festive season.
Elevated high-CV prices
After falling for the last two weeks, high-CV RB1 (6000 NAR) grade coal prices rose again to $312/t FOB, up by $18/t w-o-w as LNG prices rose following a severe leakage from both strands of the Nord Stream pipeline under the Baltic Sea.
Coal enquiries from European countries rose amid lower hope of Russian gas supply resuming for Germany this winter.
Further, an ongoing energy crisis in South Africa also contributed to the rise after state-owned power utility, Eskom, announced it was facing its worst power outages this year.
The country’s power companies are working to address the problem of poor coal quality for power generation, which often leads to unit failures.
Outlook
Portside demand for mid-CV RB2 coal is seen week as upcoming vessels from South Africa are in the low-CV RB3 category. However, the increasing presence and viability of alternate-origin coal may keep RB3 prices within a tight range.
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