India: RB2 portside prices up INR 500/t w-o-w on improved demand

After being muted over the last one-month, portside trade in South African RB2 (5,500 NAR) thermal coal picked up this week as sponge iron units, especially at the southern region, resorted to procuring imported coal even at raised offers.

The RB2 prices have moved up by INR 500/t w-o-w basis at Gangavaram, Vizag and Mangalore ports.

RB2 coal portside trade prices

*Prices in INR/tonne, ex-cess and GST

RB2 offers at Haldia continued to remain higher at INR 10,000/t amid limited stocks at the port. However, trading activity from sponge iron units around the port remained lower due to the relatively cheaper options available at Dhamra Port at INR 9,000-9,100/t.

Increase in small parcel trade at southern ports

Owing to lower availability of domestic coal in the southern states of India, sponge iron units continued to procure high-priced South African coal since last week to keep their operations running.

Lower stock, and absence of new vessel arrival at Mangalore Port further lifted RB2 coal prices at the port, leaving sponge units with no option than to accept the higher price.

However, procurement remained largely limited to small quantities of 2,000-3,000 tonne, informed market participants.

"It is tough to manage books due to heavy losses in sponge iron production. With the rise in raw material prices, there is hardly any margin, but loss. However, we don't have option of domestic coal as the grades available from SCCL are not quite suitable for the sponge iron sector," said a sponge iron producer based in Bellary.

Sponge iron prices have moved up by INR 300-400/t w-o-w and currently stand at INR 30,900/t ex-Bellary and at INR 31,100/t ex-Raipur.

Most sponge iron plants, especially in the south, have resumed booking imported coal at increased levels only on expectations of a pick-up in demand September onwards post the monsoon, informed participants.

However, coming to the eastern ports of Gangavram and Vizag that mainly cater to the Odisha and Chhattisgarh sponge iron clusters, the direct importers continued to keep their offers high at INR 8,800/t. However, no trade had been reported at this level in the ongoing week.

On the other hand, the mid-sized traders carried out portside trade for RB2 at INR 8,400-8,500/t ex-port basis. Prices exclude cess and GST.

South African imported coal price largely stable

With no major disruption at Richards Bay port this week, RB1 (6,000 NAR) grade prices remained largely stable at $133.7/t, while the RB2 (5,500 NAR) price was assessed at $105/t FoB RBCT basis.

Few Indian importers were heard enquiring for RB2 bookings for the upcoming months. The discounts for RB2 and RB3 this week are assessed at $18-19/t and $26-27/t respectively for Aug'21-loading cargo, while capesize vessel freight between RBCT to Gangavaram is at $18/t.

As per CoalMint's vessel line-up data, 0.83 mn t of South African coal is slated to arrive at various Indian ports from 2-19 Aug'21, with majority being brought in by Adani Enterprise (0.32 mn t) followed by IMR Resources at 0.16 mn t at Vizag and Ennore ports.

Short-term outlook

CoalMint believes South African thermal coal portside prices are likely to remain elevated in the near term due to higher imported South African coal prices and relatively lower stock available with most traders.

Further, with the landed cost of RB2 (5,500 NAR) coal coming at INR 9,800/t ex-Gangavaram, sellers are still compromising by offering the same at INR 8,800/t, which makes any major correction at portside prices highly unlikely in the near term.