India: Portside South African thermal coal prices rise w-o-w amid geo-political tensions

Prices of RB2 (5500 GAR) in the Asian thermal coal market rose by INR 150/t w-o-w to INR 10,000/t ex- Gangavaram. Similarly, prices of RB3 (4800 NAR) coal at Gangavaram Port were recorded at INR 8,400/, up by INR 300/t w-o-w. Furthermore, monthly prices of RB2 (5500 GAR) rose by INR 600/t as compared to INR 9,400/t in March 2024.

State-run miner Coal India Limited (CIL) continued its robust performance in terms of production in FY'24. CIL's production rose by 10% y-o-y to 773.6 million tonnes (mnt) in FY'24 as against 703.2 mnt in FY'23. Total dispatches have risen by 753.5 mnt as compared to 694.7 mnt in FY'23.

Thermal coal prices gained support due to recent geopolitical tensions, including Iran's retaliatory actions against Israel, spurring European buyers to take new positions. Concerns over vessel movement through the Strait of Hormuz further contributed. Additional geopolitical tensions could elevate thermal coal prices as increased LNG and crude oil prices are passed on to suppliers in Colombia, South Africa, Russia, and Indonesia. These nations stand to benefit from higher LNG prices and heightened coal demand.

South Africa's typically under-performing coal and rail infrastructure has shown improvement in recent weeks, boosting both domestic and export coal markets in anticipation of May's general elections. Railings to the Richards Bay Coal Terminal (RBCT) surged by 11% w-o-w to 1 mnt in the seven days ending on 21 April 2024. Port stocks at RBCT stood at 2.2 mnt on 22 April 2024, compared to 2.4 mnt on 15 April 2024, with exports surpassing receipts by 242,000 t during the week.

Deals for the week

• According to market participants, a deal of RB2 (5500 NAR) for 4,000t was heard concluded at INR 10,000/t at Mangalore Port.
  
  
• Another transaction for 4,000 t of RB3 coal (4800 NAR) was completed at INR 8,200 last week ex- Vizag Port.
  
  
• Additionally, 4,000 t of RB2 coal were sold at INR 10,200/t ex -Krishnapatnam Port.
  
  
• Another deal was heard involving the sale of 5,000 t of RB2 coal at INR 10,000/t ex- Mangalore port.
  
  

SA exports

South Africa's thermal coal exports rose by 4% m-o-m to 5.36 mnt in March 2024 as against 5.16 mnt in February 2024. However, exports rose by 4.5% y-o-y compared to 5.13 mnt in March 2023. India was the largest buyer of South African coal at 2.33 mnt in March 2024, up by 12% m-o-m as against 2.07 mnt in February 2024.

Sponge iron prices

Sponge iron prices dropped by INR 1,300/t w-o-w to INR 28,500/t exw Raipur on 26 April 2024 . Prices fell due to the downtrend in semi-finished and finished long steel segments, causing weak demand throughout the week. Cautious buyer perspectives, coupled with continuous price declines, influenced subdued market activity and buying decisions.

South African prices

According to sources, portside prices of RB3 (4800 NAR) coal rose by 14% w-o-w and are currently assessed at $82/t FOB. Similarly, RB2 (5500 NAR) rose by 8% w-o-w and are currently assessed at $97/t FOB.

Outlook

Imported portside prices of South African thermal coal are expected to increase due to ongoing supply constraints at Gangavaram Port. Furthermore, geopolitical tensions may further elevate thermal coal prices as heightened LNG and crude oil prices are transferred to suppliers in South Africa.