India: South African RB2 portside price hikes amid domestic coal shortage

Portside prices of South African thermal coal across various ports rose by an average of INR 500/tonne (t) this week  as supply shortage in domestic coal compelled sponge iron manufacturers to resort to procuring the imported variety even at raised offers.

Subsequently, Indian buyers increased their inquiries for imported South African coal, making RB1 (6,000 NAR) prices also go up by $8/t w-o-w to $151/t.

RB2 coal portside average trade prices

*Prices in INR/t, ex-cess and GST

At Gangavaram and Vizag ports, RB2 portside offers rose to INR 10,000-10,500/t levels, while at Mundra Port the same increased to INR 12,200/t.

Meanwhile, imported coal stock availability at Indian ports remains under pressure and this trend is expected to continue with very limited vessel arrivals from South Africa till 27 Sept’21, CoalMint data showed.

What led to domestic coal shortage in India?

Despite a rise in Coal India’s domestic coal production this year, an uptick in electricity demand in August and heavy rainfall in few mining areas resulted in coal shortage and reduced stock at power plants.

With the government’s decision to prioritise coal supply to the power sector from CIL and its subsidiaries, various other sectors, including sponge iron, struggled to get the rakes for coal delivery, resulting in supply disruption, informed market participants.

Owing to the sharp rise in imported coal prices this year, majority of the sponge iron manufacturers had shifted to domestic coal for blending, to keep their plants running.

However, the ongoing domestic coal crisis has made thermal coal prices in recent auction to go up and the disparity between the imported 5500 NAR grade coal and equivalent grade domestic coal has been reduced to INR 1,000/t against INR 2,500-3,000/t a month back, sources informed CoalMint.

South African coal prices shoot up

Amid constrained coal supply from Indonesia due to torrential rains and recent increase in demand from India, South African coal prices have gone up to $151/t this week.

Indian buyers are even heard to be booking China-rejected South African coal which is available at a comparatively cheaper rates against the current index.

Discounts for RB2 and RB3 this week are assessed at $18/t and $27/t respectively for Sept-loading cargo, while Capesize vessel freight from RBCT to Gangavaram is at $19.5/t. 

Short-term outlook

CoalMint believes South African thermal coal portside prices are likely to go up further as domestic coal shortage would persist for some time while stocks at Indian ports are quite limited. Further rise in RB1 import prices is anticipated amid surged demand from India and China.