India: RB2 portside prices surge on limited stock, improved demand from sponge iron units
The pick-up in demand for portside South African thermal coal since last week continued into this week also. This trend pushed up the portside RB2 (5,500 NAR) grade price...
The pick-up in demand for portside South African thermal coal since last week continued into this week also. This trend pushed up the portside RB2 (5,500 NAR) grade prices by INR 400/tonne (t) w-o-w.
However, amid the few bulk deals, sponge iron units procured imported coal only in small quantities in anticipation of correction in prices in the coming weeks.
RB2 coal portside trade prices
| Port | Aug'21 W2 | Aug'21 W3 |
| Ex-Gangavaram | 8,900 | 9,300 |
| Ex-Mangalore | 9,500 | 9,850 |
| Ex-Vizag | 8,800 | 9,400 |
| Ex-Paradip | 8,800 | 9,500 |
*Prices in INR/tonne, ex-cess and GST
Improved sponge iron demand lifts coal procurement
Amid correction in pellet and iron ore prices and controlled Covid cases, majority of the sponge iron plants in Chhattisgarh, Odisha and West Bengal have increased their capacity utilisation since the past two weeks. Further, with the monsoon season nearing its end, sponge iron units also remain hopeful of pick-up in demand from September, leading to a rise in production, informed market participants.
However, domestic coal being cheaper against the imported material, continued to make the former the more preferred option against the latter. Sponge iron units use domestic coal for blending with imported coal as running plants solely on imported coal remains largely unviable.
The difference between SECL's 5,000 GCV coal price and its imported counterpart is currently assessed at INR 6,502/t at Vizag Port, as per CIL data.
On the other hand, sponge iron manufacturers located near the southern ports, continue to rely more on imports amid short supply of high-CV domestic coal in the region.
Depleting coal stocks at the ports and anticipation of increased demand in the coming days have made some direct importers hold their offers.
Decline in thermal coal stock at major ports
| Port | Week 32 (1-5 Aug'21) | Week 33 (8-12 Aug'21) | Difference (in %) |
| Ex-Gangavaram | 2.28 | 2.15 | -5.7 |
| Ex-Vizag | 1.49 | 1.41 | -5.3 |
| Ex-Krishnapatnam | 1.51 | 1.24 | -18.2 |
| Ex-Mundra | 1.73 | 2.11 | 21.9 |
| Ex-Haldia | 0.32 | 0.30 | -6.5 |
*Quantity in mn t
South African imported coal prices remain elevated
The South African RB1 (6,000 NAR) grade price continued to remain elevated at $137.9/t as on 18 Aug'21.
The discounts for RB2 and RB3 this week are assessed at $18-19/t and $26-27/t respectively for September-loading cargo, while Capesize vessel freight from RBCT to Gangavaram is at $18/t.
Owing to several logistic concerns in the country and rallying thermal coal prices since Apr'21, vessel arrival from South Africa has taken a major hit over the last one month and is expected to remain under pressure.
As per CoalMint's vessel line-up data, 0.58 mn t of South African coal arrived in India over 13-19 Aug'21 with the major portion being imported by a few large players for their captive consumption.
Short-term outlook
CoalMint believes South African thermal coal portside prices are likely to remain elevated in the near term amid high imported prices and depleting stock at ports. The end of the five-year fuel supply agreements (FSAs) of sponge iron units this August and no extension of the same would also make the producers opt for the imported material.
