With the sharp rise in South African thermal coal prices this week amid increased European demand, portside RB3 (4800 kcal/kg NAR) coal prices have risen by INR 1,000/t w-o-w to INR 15,000/t at Vizag and Mangalore ports. Indian manufacturers have been opting for more of RB3 over RB2 coal since past few months amid latter’s unaffordability amid weak sponge iron demand.
High-calorific value (CV) RB1 (6000 kcal/kg NAR) grade coal prices rose to $355/t FOB, up by $55/t w-o-w as European buyers increased coal purchases after Russia announced that it would curb LNG flows across the region.
A majority of thermal coal procurements in the domestic market by sponge iron manufacturers this week were in the low-CV RB3 category, as prevalent weak steel prices have made it the most viable option.
Portside RB2 coal prices largely stable
Demand for RB2 (5500 kcal/kg NAR) coal, remained firm at INR 18,000/t at Gangavaram Port, largely unchanged from last week.
Sponge iron units continue to limit any major direct imports ahead of the monsoon season to avoid the burden on operating margins in an inflationary environment.
Improvement in domestic coal availability has also capped imported trades as dispatches to the non-power sector increased compared to last month, market participants informed.
Strong European demand for South African coal
As the deadline for sanctions on Russian coal approaches on 10 August, European buyers continue to increase purchases of high-CV South African coal.
Low to mid-CV grades have also risen simultaneously with prices of the 5500 kcal/kg NAR coal assessed at $225/t FOB, up $20/t w-o-w, while prices of 4800 kcal/kg NAR coal were assessed at $145-150/t FOB, up $10/t w-o-w.
Following elevated LNG prices since 2021, many countries in Europe now rely heavily on coal-fired power generation and have revived several coal-based power plants to replace gas imports.
During 1-20 June, exports from the country to the Netherlands were at 0.4 mnt, followed by Spain at 0.2 mnt, and Poland and Italy at 77,626 t and 45,000 t, respectively, CoalMint data showed.
Short-term outlook
Portside trades of South African RB3 coal is likely to remain high amid relatively cheaper prices compared to RB2 coal. Imported South African coal demand may remain weak amid declining steel prices in the domestic market.
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