India: Portside RB2 prices rise by INR 1,200/t amid advance bookings, limited stock

Portside prices of South African coal have risen further by INR 1,200/t w-o-w to INR 15,000/t for vessels arriving in early-Feb'22 at Gangavaram Port. The rise is on account of persistently lower stock levels at major ports which have compelled sponge iron manufacturers to make advance bookings.

A sharp $21/t w-o-w rise in imported coal prices is further fuelling the rise in portside prices.

Several traders were also offering RB2 coal at INR 16,000/t levels for mid-Feb'22 as they expect the supply tightness to aggravate further, market participants informed.

Inventory limited at sponge units

Inventory levels at sponge iron units continue to remain limited as volatility in the South African coal market over the last few months had prompted them to go slow on procurement.

Several units were even heard bidding aggressively at the recent auction conducted by SECL, with domestic coal getting booked at a premium. Prices for G-7 grade went up to INR 9,800/t.

"Given that the prices of South African coal have again risen sharply with almost negligible stock in the market, we are trying to cover the gap with domestic coal. Our capacity utilisation has already been under pressure and the current rise in raw material prices would further drive up sponge iron prices," a Raipur-based sponge iron manufacturer said.

Sponge iron prices have gone up by INR 1,700/t w-o-w and are assessed at INR 34,700/t, ex-Raipur.

RB2 portside prices this week

Prices in INR/t, ex-cess and GST

South African coal prices surge

A sharp rise in the South African thermal coal index also fuelled the rise in portside prices this week as RB1 (6000 NAR) grade prices rose further to $181/t, FOB as on 27 Jan'22, up by $21/t w-o-w.

A surge in natural gas prices has propelled the price rise, in addition to the ongoing supply disruption surrounding an acute coal shortage at Richards Bay Port Terminal over the last few months.

The sudden disruption in Russian coal exports to Europe emerging out of the political tension between Russia and Ukraine is likely to hit coal supply to the northwest European region, which includes Germany, the Netherlands, and Belgium.

These factors may thus further keep global coal prices on the higher side as the Indonesian export ban has already tightened the fundamental balance in early 2022.

The severe coal supply shortage continues to keep RB2 offers higher with a premium of over $2/t, while the discounts for RB3 are at $8/t for February-loading cargoes.

Short-term outlook

CoalMint believes portside RB2 prices are likely to remain higher due to limited vessel arrivals from South Africa in the coming weeks. The rising trajectory of natural gas prices may continue to lift imported coal prices.