India: Sponge iron makers switch back to South African coal amid Russian blend concerns

High-CV Russian coal demand seems to be abating in the Indian sponge iron sector amid technical concerns while blending with South African RB3 (4800 NAR) grade.

According to market participants, excessive usage of Russian coal has been resulting in reactivity issues in their sponge iron kilns leading to the formation of huge fines, while the quality of Russian coal is also not consistent given the lack of homogenous blending.

"While on paper the carbon content of Russian coal is mentioned as 55-58%, in reality, it comes to around 50-51% FC, making it tough to decide on the quantity to be used for manufacturing sponge iron," quoted a manufacturer based in Raipur.

Several large-scale DRI producers are also blending RB3 coal with Australian 4600 NAR Carmichael coal, beside availing of domestic supplies.

"RB3 is the most preferred option currently given its rising imports in India and reasonable pricing. The blending ratio of RB3 and other alternate origin coal stands at 30:70 where 70 comprises of Russian, Australian, and domestic supplies," a reputed sponge iron manufacturer said.

DRI producers continue to make small parcel trades of RB3 coal at INR 14,500/t at Vizag Port, while demand for mid-CV RB2 (5500 NAR) remained weak, with no major trades.

Declining imports of Russian coal

India's thermal coal imports from Russia are set to decline for the second-straight month in October to around 1.1 million tonnes (mnt), down by 27% m-o-m, as per CoalMint data.

The fall in imports came as major end-users like sponge iron and cement manufacturers and brick kilns amassed huge inventories of the fuel.

An increase in Russian coal prices last month to $200/t CIF as against $185-190/t in July-August, 2022 also resulted in a fall in buying appetite.

RB1 prices weak amid low European demand

High-CV RB1 (6000 kcal/kg NAR) grade coal prices continued to fall and were at $217/t, down by $22/t w-o-w amid weak European demand.

Inventories of coal-fired power plants in Germany are nearly full and likely to last till the end of the year, as per market participants.

Weak demand in Europe is likely to keep South African coal prices under pressure, which may provide Asian buyers an opportunity to make purchases, participants informed.

Outlook

Portside prices of low-CV RB3 coal are seen climbing higher with strong demand from the DRI producers during the peak manufacturing season in winter.