Portside prices of South African thermal coal remained firm this week, rising slightly by INR 200-300/t amid resilient coal import prices globally and weak domestic availability, compelling sponge iron manufacturers to engage in contracts for small parcels.
High-calorific value (CV) RB1 (6000 kcal/kg NAR) grade coal prices have traded above the $300/t-mark over the last one month, with the latest price assessed at $353/t FOB as on 14 July.
The rise in prices has come in the wake of South African rail operator Transnet Freight Rail’s scheduled maintenance shutdown between 12-22 July and strong European demand.
Portside prices of low-CV RB3 (4800 kcal/kg NAR) grade coal at Gangavaram are assessed at INR 16,500/t, while mid-CV RB2 (5500 kcal/kg NAR) stood at INR 18,500/t. Prices exclude cess and GST.
Any major rise in bookings by the sponge iron sector was capped due to rising moisture accumulation in coal during the rainy season. Buyers were largely focused on need-based bookings to satisfy immediate requirements related to keeping their kilns active.
Several DRI producers were also heard buying RB3 coal fines, prices of which were lower at INR 14,000/t, as these are easily inflammable as against coal during monsoons.
Restricted domestic supply
Coal dispatches to the non-power sector by domestic miner Coal India Ltd. (CIL) continued to remain under pressure amid heavy rainfall across several parts of the country.
Volume of coal dispatched in June fell by 13% m-o-m to 8 mnt, which is likely to increase in the coming month as mining activity gets affected.
Despite elevated premiums for domestic coal, sponge iron manufacturers are waiting for the upcoming South Eastern Coalfields Ltd. (SECL) auction on 19 July in which a total of 837,000 t of G6 to G-15 grade coal will go under the hammer.
Following CIL’s decision to terminate renewal of long-term contracts for coal supplies under linkage auctions for the non-power sector, participation in the domestic auctions are likely to rise raising prospects for domestic coal prices to rise further.
Coal sales via the regular spot auctions conducted by CIL subsidiaries have fetched bid premiums of 383% over the notified price during April-June. In contrast, sales under the tranche-II and III of the linkage auctions fetched nominal premiums of 11% and 13%, respectively.
Short-term outlook
Portside trade in South African coal is likely to remain elevated in line with higher imported coal prices and limited domestic supply. However, bulk procurement may remain limited amid the ongoing monsoon season.
To know more about the South African coal demand in the domestic sponge iron industry join us at India Coal Outlook Conference. CoalMint will be hosting the India Coal Outlook Conference on 3-4 August 2022 at The Lalit, New Delhi, to discuss the key issues pertaining to domestic coal production and supply, the government’s objective of controlling imports and domestic supply gap affecting many industries, the need to increase the purchasing power of Indian steel companies in the volatile global coking coal market as well as issues related to decarbonization of the coal value chain.
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