A series of logistic constraints at Richards Bay Coal Terminal (RBCT) has not only impacted South African thermal coal prices but is also adding to the costs of imports for the buyers.
RB1 (6000 kcal/kg NAR) grade coal prices have traded above the $300-tonne (t)-mark over the last three weeks.
The damages caused by the fire incident at RBCT Port in October 2021, that it is yet to fully recover from, have resulted in a long waiting period for vessels at the port, leading to a diversion of coal vessels to the dry bulk terminal (DBT) within the RBCT complex.
With the increased number of cargoes at the DBT, majority of Supramax and Babycape vessels are being loaded, resulting in added freight costs for the importers. Freight rates for these vessels are higher by $10-20/t against Capesize.
This has translated into reduced vessel arrival from the country, crreating an additional burden for Indian sponge manufacturers – a key buying segment of South African coal, which is already reeling under constrained supply of domestic coal.
As per CoalMint’s line-up data, vessels carrying a total of 0.45 mnt of South African coal are arriving at Indian ports between 20-26 May, 2022.
Indian sponge sector reels under pressure
Amid limited availability of both imported and domestic coal, several sponge iron plants have either cut down their capacity by 40-45% or have temporarily shut shop.
Sponge iron demand in the domestic market has also turned sluggish and prices have reduced for PDRI to INR 34,300/t exw-Raipur, down 10% m-o-m.
With tight stockpiles at ports and limited vessel arrival, portside offers for RB2 (5500 kcal/kg NAR) grade have remained firm at INR 22,500-23,000/t, ex-Gangavaram, while bids are heard at a lower INR 20,000/t.
Several sponge iron players have opted to procure RB3 (4800 kcal/kg NAR) coal at INR 19,000/t, to keep operations running.
In the case of domestic coal, the crunch in supply has also been indicative of a sharp rise in biding at the recent Singareni Collieries Company Ltd (SCCL) auction, where a few lots of G7 and G8 (5000-5500 kcal/kg NAR) grades were bid at INR 10,000/t.
The grades were finally sold at INR 2,672-4,888/t. Overall, bid premiums were 99% higher than the reserve price which was at 58% in March. Bid premiums at South Eastern Coalfields (SECL) also rose almost 495% from the notified price as against 390% in March.
Short-term outlook
Amid limited scope of any respite from the logistic constraints at RBCT Port, imported coal prices are likely to remain elevated. This may lead to a rough road ahead for the Indian sponge iron sector.
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