The portside prices for South African RB2 (5500 NAR) coal saw a correction of INR 200/t this week as buyers moved to the sidelines amid increasing COVID cases and restrictions.
At Gangavaram prices were assessed at INR 6,600/t, whereas in Haldia, Mangalore and Paradip port prices were at INR 7,600/t, INR 7,100/t, and INR 6,900/t respectively. In Vizag offers were heard at INR 7,000/t but no trades had been concluded so far. Prices are exclusive of cess and GST.
Given the strict COVID-19 restrictions in Chhattisgarh and Maharashtra, trading activities from the two states remained largely muted, whereas demand from Odisha, West Bengal and southern part of the country remained slowed but steady.
“Bidding has almost reduced down to half this week. Rising infection rate and lockdown restriction in large trading hubs are likely to continue for some time now,” quoted a Delhi-based trader.
Buying by large players, smaller ones retreat
It was observed that while few large sponge iron players resorted to replenish their RB2 stocks before monsoon amid limited availability of stock a port, the smaller ones remained on the sidelines due to uncertainty ahead and in fact have reduced their capacity utilizations to work on minimum load.
“Many sponge plants are working in limited manpower due to fear of infection. Capacity utilization also has been reduced due to lower raw material availability owing to higher prices,” a sponge iron manufacturer based in Raipur said.
The sharp rise in the imported South African coal price in last two months had prompted several sponge iron units in Raipur to switch to domestic coal. However, amid revived interest, the domestic coal prices have also risen leaving several sponge players with lower margins.
South African coal index remains stable
The API4 index almost remained steady in the range of $93-94/t this week as Tansnet’s locomotive issues seem to be getting gradually resolved. The discounts for RB2 were heard at $16, and RB3 at $26/t. The freight rate between RBCT to Gangavaram port for capsize vessel has been assessed at $15/t this week.
What lies ahead?
Generally, April-May months denote the most preferred time for restocking before monsoons. However, the rising COVID-19 cases in the country along with the consequent regional lockdowns is acting as a deterrent for buyers to make purchases and subsequently increasing possibilities of further correction in portside RB2 coal prices.
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