India: RB2 thermal coal portside prices continue to head north with sellers holding on to stock

South African RB2 (5500 NAR) thermal coal portside prices, that shot up last week in API4 index, is continuing on an upward trend this week also. RB2 prices shot up last week by an average of INR 600/t and by INR 300/t this week as import prices are rising due to difficulties in securing smooth rail movement to Richards Bay Coal Terminal. With prices rallying, there is a rush to buy South African coal from the ports.

However, coal sellers that were bearing losses since the past few months have now decided to hold on to their stock and are offering limited quantities in anticipation of a further rise. CoalMint's stock report reveals a not-so-big drop of 1.3% (w-o-w) for thermal coal stock at Indian ports last week.

In Gangavaram, portside trade for RB2 coal has been heard at INR 6,800/t. Whereas, at Haldia, prices are assessed at INR 7,300/t. Prices are exclusive of cess and GST.

Major factors behind the hike in RB2 prices

1) Rising index and sellers holding stock
API4 index is moving up and is expected to remain elevated in coming days as the Transnet issues have not yet been resolved and also because heavy flooding has led to Australia's Newcastle port shutting down for at least two weeks.

"Sellers are expected to hold back their offers till the financial year-ending 31st March, with expectations that the index continues to move up, post which portside offers could rise to INR 7,200-7,300/t ex-Gangavaram", predicted a trader based in Raipur.

2) Australian port's temporary shutdown

Australia's major coal exporting port, Newcastle has been shut for the last two weeks due to heavy flooding which is why demand for its close competitor - South African coal has increased, pushing up the index.

What lies ahead?

CoalMint's vessel line-up reveals a total of 0.47 mn t of South African coal coming to Gangavaram port between 23 Mar-3 Apr, with Mahendra Sponge accounting for 30% while Agarwal Coal and IMR Resources bringing in 34% each of the total coal import.

In the current scenario, portside prices for RB2 coal are expected to remain at elevated levels and with coal stocking season starting from April (before monsoon sets in), buyers would have to ultimately accept the raised offers across various ports.