India: South African RB2 portside prices fall to three-month lows on weak demand

• Falling sponge offers drag down portside prices
  
  
• Transnet disruption pushes up RB3 export offers
  
  

Prices of the South African RB2 (5500 GAR) coal in Asian markets fell by INR 350/tonne (t) to INR 9,650/t ex-Gangavaram. Prices have hit a three-month low, as per data maintained with BigMint. Prices of RB3 (4800 NAR) at Gangavaram and Vizag ports were recorded at INR 7,750/t, down INR 350/t w-o-w.

Prices have dropped owing to reduced buying interest. Sufficient stocks with end-users continue to drag down procurement interest of buyers.

Most traders preferred offering cargoes over securing stocks. Despite supply disruptions in South African-origin coal and limited availability of Australian cargoes, demand from the sponge iron sector remained weak.

On the supply side, the abundance of cargoes compared to the current weak demand scenario led suppliers to lower their offers in an effort to liquidate stock.

Subdued long steel demand and falling bids amidst price pressure from sponge players have weighed on the bids for South African portside prices. Additionally, a few traders are seen offering material on the lower side amidst panicky market participants and weakening steel market sentiments, highlighted a trading source.

Deals recorded by BigMint:

• A deal for 5,000t of RB3 was closed at Vizag Port at INR 7,700-7,800/t.
  
  
• A deal for 15,000t of RB2 was done at INR 9,750/t exw-Mangalore.
  
  
• A deal was done for 3,000t of RB2 at INR 9,800/t exw-Gangavarm.
  
  
• A trader was heard to have sold around 5,000t of RB3 from Ennore Port at INR 8,000/t
  
  

Factors impacting prices

South African prices edge up w-o-w post-Transnet disruption: Prices of RB3 (4800 NAR) have picked up by $2/t and are assessed at $73/t FOB. Also, RB2 (5500 NAR) prices inched up by $2/t to $93/t FOB. South Africa's Transnet has recently informed about the service disruption that took place yesterday (16 July 2024) which is impacting rails in its network. Several incidents, including 25-KV power outages at Hlungwana, Ulundi- Ilangakazi, and Moolman, an OHTE power outage at Mahulumbe, cable theft at Ermelo (Bothashoek - Woestallen), and an OHTE power trip between Lenjane and Engogweni have affected normal operations at Transnet.

However, these developments are less likely to support prices in the near term given the weaker demand outlook.

Sponge iron prices edge down w-o-w:Sponge iron (P-DRI) prices dropped by INR 300/t w-o-w to INR 25,450/t exw Raipur on 19 July.

Outlook

South African coal prices are likely to remain under pressure due to subdued demand from key sectors, despite recent disruptions in supply logistics. The market outlook remains bearish owing to persistent weak demand, particularly from the sponge iron sector. Moreover, operational disruptions on Transnet's coal line and the delayed annual maintenance on South Africa's Transnet freight rail's network are expected to impact rail deliveries, but these factors are unlikely to provide significant support to prices given the overall weak market sentiments.