South African coal experienced a dramatic price rally in the last two months of 2020, However once markets reopened post the New Year holidays the API4 index registered a drop of $4/t to $86/t.
Interestingly, today the index once again observed an uptick of $3/t (at $89/t) on 10-days closure of RBCT port for maintenance starting 8 Jan’20.
CoalMint learned from market sources that the price rise towards the end of 2020 was mainly supported by physical index sale rather than any significant improvement in demand especially from its key importer, India.
Supply tightness in coming days
RBCT port is set to shut for annual maintenance starting 8 Jan’21 for ten days. As per the market participants, the thermal coal stock at the port stands at around 3 mn t (less than the average of 4mn t), which is why supply is likely to remain tight in the coming days.
In addition, there are rumours of a level-4 lockdown to be implemented in S.Africa amid a major outbreak and sharp rise in Covid-19 cases, which could potentially disrupt the supply-chain in the near term.
Coal stocked up by Indian buyers
Indian buyers of South African coal have already made their purchases in Dec ’20 (when the prices started to rise), resulting which demand has stagnated.
“About 40% Indian plants have stocked up thermal coal for 2-3 months which is why demand for S.African coal is quite low at present and portside prices are not getting any support despite variations in the index”, commented a trader based in Kolkata.
The discounts for RB2 coal are currently heard at $14-15/t, whereas, for RB3 is around $24-25/t. The freight for panamax vessel from RBCT to Indian ports is at around $12/t.
Outlook
We expect the API4 index to see some uptick in coming days but once again stagnate towards the end of the month amid tepid demand especially from India.
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