India: RB2 portside trade disparity continues amid uneven domestic coal availability

Increased offers of RB2 (5,500 NAR) thermal coal received acceptance from sponge iron clusters in the southern region. However, resistance to the higher rates from buyers in the eastern and central belts of India continued into this week too.

RB2 portside prices, across various trade deals concluded at Mangalore and Ennore ports, were assessed at an average INR 8,700/tonne (t), up by INR 400/t on a w-o-w basis. This acceptance of increased prices is mainly due to limited availability of domestic coal and absence of any new vessel arrival at the southern ports since the past few days.

On the other hand, with various auctions being conducted by CIL's subsidiaries this month, increased offers for RB2 coal at Gangavaram and Vizag ports failed to get any acceptance.

CoalMint's analysis shows that the price of the domestic grade equivalent of the South African 5,500 NAR is still cheaper by INR 1,000-1,500/t ex-plant delivered basis in the Chhattisgarh market.

"While the fixed carbon (FC) content in domestic coal is lesser against imported coal, the demand for sponge iron in India continues to be sluggish. That is why sponge iron units are continuing to opt for cheaper domestic coal with lesser FC content that gives less yield on per tonne basis," said a Raipur-based domestic coal trader.

According to market participants, sponge iron prices (ex-Raipur) have gone up by INR 700/t in the last ten days, driven by increased export demand for billets and elevated pellet prices. However, steel demand in India continues to remain subdued obstructing demand for domestic sponge iron and its raw material, thermal coal.

RB2 coal portside trade prices

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

RB2 offers at Gangavaram were in the range of INR 8,600-8,800/t, while bids from sponge iron units failed to rise above INR 8,000/t resulting in very limited trades being concluded.

Surging RB1 grade coal price

Post-disruption at Richards Bay Coal Terminal (RBCT) and Transnet, due to the civil unrest last week, port operations were restored this week. However, Transnet's rail line is on maintenance till 26 July and no offers for thermal coal were heard being made for August, informed an India-based importer.

The RB1 (6,000 NAR) grade price is already trending high at 131/t whereas offers for RB2 (5,500 NAR) were last heard at $100-102/t, FoB RBCT basis.

In the current scenario of increased thermal coal demand globally, Indian imports from South Africa are likely to remain under pressure in the near-term.

"We already were in a wait-and-watch mode over the last few weeks. It is highly expected that supply will remain constrained for some time now in South Africa. Thus, there is no major booking on the cards," a Mumbai-based importer said.

CoalMint's vessel line-up data reveals, around 0.64 million tonnes (mn t) of South African coal is slated to arrive at Indian ports between 19-22 Jul'21 with the maximum quantity of 0.33 mn t being brought in by Adani Enterprise, while the rest of the quantity is being brought by end-users.

Short-term outlook

CoalMint believes, South African thermal coal prices, imported and portside, are likely to remain elevated in the near term. But acceptance of high RB2 portside offers at Gangavaram and Vizag ports seems unlikely amid availability of domestic coal.