Indian buyers pull down portside prices of South African thermal coal

Coal buyers especially at the eastern ports are taking advantage of adverse weather conditions and are inquiring at much lower prices. In fact, many of them have adopted a wait and watch mode to see how much lower can the prices go down before taking any position.

"Our recently booked cargoes are coming at higher cost. However, given the bargaining power with buyers at present, we have to sell the material even at losses", revealed a reputed trader based in Mumbai.

Key highlights

• Portside offers for RB2 (5500 kcal/kg NAR) grade thermal coal especially at Gangavaram has moved down amid heavy rains (resulting in increased moisture content of the stock) and aggressive negotiation by the buyers.
  
  
• In a confirmed deal 5,000 tonne of RB2 grade coal has been booked at INR 4,500/t ex-Gangavaram. Prices are exclusive of cess and GST.
  
  

RB2 prices at other major ports are assessed as:

• RB1 grade coal ex-Kandla is available at INR 5,400-5,500/t. Prices are exclusive of cess and GST
  
  

End user market sentiment

Sponge sector

In terms of demand from the sponge sector, market participants informed that the sponge demand has improved to what it was during lockdown months of April to July. However, it is still lower compared to what it was around same time last year. Also, at Gangavaram port thermal coal stock is available in excess quantity, which is why the buyers are at an advantage in negotiations.

"In case of Krishnapatnam port which is being taken over by Adani, traders are not booking any new vessels and existing material is being sold at lower prices now", remarked a trader based in Bellary.

"While RB2 prices at Haldia port has inched down by INR 100-200/t, it has not fallen in the proportion to the downtrend observed at Ganagavram", quoted a trader based in Kolkata.

Cement sector:

Amid the ongoing tension between Australia and China, the 5500 NAR Australian coal prices have fallen by $3-4/t (currently assessed at $36-37/t, FoB basis) which is why Indians are preferring Australian coal over South African one, further acting as an disadvantage for S.African coal prices.

"The demand for coal from the cement sector has improved and first and fourth quarter of any year is always a procurement season for the cement industry, which is why the buying interest especially for Australian coal has also improved", informed a cement manufacturer based in South India.

Outlook ahead

The central government's latest capital expenditure (of INR 37,000 crore) and the end of monsoons is expected to boost new and ongoing infrastructure projects, especially in India's industrialized state.

This is expected to give a push to the sponge and steel demand in the upcoming months and so will their coal requirement. With a positive outlook for the cement sector also in the upcoming months, coal demand and prices are likely to find support in the Indian market.