India: Portside South African coal prices remain range-bound; expected to decline

• Thermal coal port stocks inch up w-o-w
  
  
• Domestic coal auctions fetch improved response
  
  

BigMint's assessment shows that South African coal RB2 prices remained steady at INR 9,650/t ex-Gangavaram, with RB3 (4800 GAR) prices at both Gangavaram and Vizag ports stable at INR 7,700-7,750/t w-o-w. Trades in the thermal coal market were limited due to low interest from major buyers, which kept the gap between offers and bids wide.

Demand from India's industrial sector remained weak due to slow construction activity caused by the ongoing rain. Demand from other Asian importer (China ) also remained subdued but is expected to pick up from mid-september.

Few participants shared bids are falling to INR 9,300 levels. However, this bid offer disparity refrained deals from taking place.

India's thermal (non-coking) coal imports fell to their six-month lows in July 2024. Volumes were recorded at 14.9 million tonnes (mnt) last month, the lowest seen since the 14.5-mnt level seen in January this year.

Factors driving portside coal prices:

• RB3 prices range-bound:Prices of RB3 (4800 NAR) coal have have remained stable at $75/t FOB. Prices for RB2 (5500 NAR) have inched up to $94/t FOB.
  
  
• Sponge iron prices edge up w-o-w:Sponge iron (P-DRI) prices edged up by INR 200/t w-o-w to INR 24,400/t exw Raipur on 16 August.
  
  
• Thermal coal port stocks:Non-coking or thermal coal stocks at Indian ports were at 14.45 million tonnes (mnt) in week 32 against 14.5 mnt in week 31, stable w-o-w.
  
  
• Better response in domestic coal auctions - Domestic end users are focusing more on domestic coal consideration currently. Also, Coal India (CIL), India's domestic coal supplier, decided to reduce the earnest money deposit (EMD) for its single window mode agnostic e-auction to encourage broader participation. CIL plans to provide more coal for power plants than their annual contracted quantities (ACQs) which was up to a maximum of 120% of ACQ. Also, in a recent update, CIL will now face penalties if it fails to supply coal through e-auctions. This change aims to increase CIL's supply capacity while maintaining its market relevance. The adjustments are designed to ensure that contracts are fair and equitable, particularly as CIL faces growing competition from commercial mining and private players. CIL's e-auction sales spurted by 69% m-o-m to 6.50 mnt in July against 3.80 mnt in June on the back of larger buyer participation for domestic coal.
  
  

Outlook

South African coal prices at Indian ports are likely to face downward pressure in the coming weeks due to subdued demand and high stock levels. The steady prices for RB2 and RB3 grades reflect limited trading activity, with buyer interest remaining weak amid ongoing rains and sluggish demand in India. The push from CIL to increase domestic coal supply is further expected to limit the demand for imports. With Coal India increasing its competitive edge, South African coal prices may soften, particularly as stock levels remain stable and bid-offer gaps persist.