India: Portside South African thermal coal prices hold steady despite weak sponge iron market

• Sponge iron prices drop by over INR 1,000/t w-o-w
  
  
• Thermal coal stocks at Indian ports up marginally
  
  

BigMint's assessment indicates that portside prices of South African thermal coal remained largely stable this week. Prices of RB2 (5500 GAR) were assessed at INR 9,500/tonne (t) while RB3 prices were at INR 7,600/t, ex-Gangavaram.

The South African thermal coal market softened in the week due to weak domestic sponge iron prices in India. According to market sources, the decline in sponge iron prices in India has dampened demand for South African coal, with buyers adopting a cautious stance.

Prices for sponge iron in India are already falling, which is likely to pressure South African thermal coal. Currently, there is a significant gap between bids and offers, and market liquidity is limited.

Everyone is in a holiday mood, and with falling sponge iron prices buyers are keeping bids low, hoping for further price drops.

Thermal or non-coking coal stock at Indian ports rose marginally by 2.3% to 12.75 million tonnes (mnt) in week 42 from 12.47 mnt in week 41, according to BigMint data.

Market overview

• RB3 prices stable w-o-w:RB3 (4800 NAR) offers remained unchanged w-o-w at $70/t FOB. Meanwhile, RB2 (5500 NAR) prices edged down to $89.5/t FOB. Throughout the week, coal prices fluctuated within a narrow band, with buyers resisting bids above $90/t, marking a decline w-o-w.
  
  
• India's domestic coal prices rise w-o-w: BigMint's latest assessment indicates that 4500 GCV coal prices rose to INR 5,900/t exw-Bilaspur, while 5000 GCV coal increased to INR 7,300/t, up INR 100-400/t w-o-w. India's domestic coal prices increased this week due to demand-supply gap and strong demand.
  
  
• Sponge iron prices fall: Sponge iron (P-DRI) prices fell by INR 1100/t w-o-w to INR 26,450/t exw-Raipur on 25 October.
  
  
• South African thermal coal exports up in September: South African non-coking (thermal) coal export shipments in September were at 5.14 mnt compared to 5.11 mnt in August, up 1% m-o-m. However, exports were up 6% y-o-y from 4.85 mnt in September 2023
  
  

Outlook

The Indian thermal coal market is expected to remain subdued until after Diwali which falls on 31 October, as buyers delay purchases amidst festive celebrations and falling sponge iron prices. Demand for South African coal may pick up in November, but market liquidity will remain tight in the near term due to a wide bid-offer spread.

With RB3 prices holding steady and RB2 prices witnessing minor declines, any significant recovery in coal prices will depend on post-Diwali buying activity. Suppliers are focusing on clearing December-loading inventories, anticipating stronger demand toward the end of the year.