Portside prices of South African RB3 (4800 kcal/kg NAR) coal continued their upward trajectory this week, climbing up to INR 16,000/t at Vizag Port, up INR 1,000/t w-o-w, as demand for low-CV coal remained strong from sponge iron manufacturers.
Buyers, in fact, preferred making RB3 bookings over domestic coal as it incurred better realisation just by adding some extra transportation cost.
Mid-CV RB2 (5500 kcal/kg NAR) procurement, though, remained weak amid resilient offers at INR 18,000/t at the port and several instances of impurities in the material.
0.9-1 t of South African RB3 coal is needed to produce one tonne of DRI, as against 0.8 t of RB2. Domestic coal requirement is around 1.3-1.4 t.
According to market participants, traders have been incurring huge losses by offering RB2 coal at these rates as the stock currently at ports was booked at higher prices.
Imported vs domestic
With the elevated domestic coal prices surrounding higher auction premiums, sponge iron manufacturers now prefer imported stock over the former.
As a result, the ratio of using imported vs domestic coal in PDRI manufacturing also has changed to 70:30 ratio (imported coal: domestic) in the current market which earlier was at 50:50, a sponge iron manufacturer said.
Usage of alternate fuels like white coal, husk, and briquette also remains in place in small quantity as it’s available at half the current prices of coal.
Alternate fuels can provide energy up to 4,000 GCV and can be used for blending purposes up to 100% substitution.
Imported prices ease slightly w-o-w
RB1 (6000 kcal/kg NAR) grade coal prices eased by $12/t w-o-w to $343/t FOB as coal transportation picked up pace at RBCT Port. A sharp fall was limited amid strong demand in Europe as the 10 August deadline for sanctions on Russian coal approaches.
Mid-CV RB2 prices also eased by $25/t w-o-w to $200/t FOB, while that of RB3 were up by $10/t w-o-w to $160/t, FOB.
Direct imports by sponge iron manufacturers currently remain under pressure as volatility in the exchange rate has compelled sponge iron units to making bookings in stock and sale.
Short-term outlook
Portside trades of South African RB3 coal is likely to remain high amid relatively cheaper prices compared to RB2 coal. The scope for any major rise in prices remains limited owing to the weak domestic demand environment.
To know more about South African coal demand in India and the changing dynamics of its use in the domestic sponge iron sector 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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