India: Portside RB2 prices range-bound as sponge iron units wait-and-watch

Portside South African coal prices continued to remain range-bound this week as sponge iron manufacturers adopted a wait-and-watch mode.

Owing to limited ready stock at ports, traders were heard offering RB2 (5500 NAR) grade coal in the range of INR 15,800-16,000/t at Gangavaram Port this week, up by INR 400-600/t w-o-w.

However, no major deals were reported as limited rakes availability and elevated portside prices compelled them to delay bookings.

According to market participants, constrained coal stock at power plants has again forced miners to redirect supply to the power plants, leaving the non-power sector with little option but to wait till supply stabilises.

"The sponge iron units are currently in a hand-to-mouth situation wherein they are waiting for rake allotment for over four-five days after booking. Majority of Mar'22 vessels have already been booked in advance," a Delhi-based trader said.

Coal stock at power plants continues to remain under pressure, assessed at 25 mnt and which is sufficient for 12 days of consumption, as on 9 Feb'22, data from the Central Electricity Authority showed.

RB2 portside prices this week

Prices in INR/t, ex-cess and GST

South African coal prices strengthen further

Constrained supply situation from Indonesia continues to fuel the rally in South African coal prices as RB1 (6000 NAR) grade coal for the current week has risen further by $19/t w-o-w to $195/t, FOB.

Several European countries were heard booking South African coal amid the expectation of tight LNG supply from Russia surrounding the latter's ongoing political tension with Ukraine.

Although coal supply at RBCT Port have improved by up to 2.4 mnt during this week, it continued to remain below the average 5-mnt-mark.

RB2 coal is being offered at a premium of $5/t, while the discount on RB3 (4800 NAR) is assessed at $5/t.

Short-term outlook

CoalMint believes portside RB2 prices are likely to remain elevated due to tight stock and limited vessel arrivals from South Africa in the coming weeks. Rising natural gas prices and tight supply from RBCT Port may further continue to support imported prices.