Moderate demand keeps South African RB2 coal offers to India in check
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South African thermal coal offers to India continue to remain steady with minor fluctuations.
Key updates
---The buying interest in India was moderate this week.
---While it was being speculated that API index price would move up this week with South 32 starting production cut at one of its coal mines starting 1 September for three months, market didn't react much to this news.
---This is because already majority South African miners are undergoing production cuts since past few months amid COVID-led tepid seaborne demand which had failed to push up the South African thermal coal prices, market participants informed CoalMint.
User industry scenario:
---The sponge iron prices in India have moved up since past few months. But as this price rise is more cost-driven (rise in pellet and iron ore price) rather than being demand-driven, it has not given enough support to thermal coal price in India.
---In case of another key user of S.African coal, cement sector, although the demand has improved since April, cement manufacturers are still operating at 50-70% of capacity amid lacklustre demand from the construction sector. The key reasons being slow down in construction activities in India during monsoon and liquidity crunch faced by the sector stalling many projects.
Imported coal at CFR India basis for Sep-Oct shipments
| Grade | Price/t | Discount/t |
| RB2 | $55.5-56 | $8-9 |
| RB3 | $50-51 | $12-13 |
The freight for capsize vessel has moved up this week by $1-1.25/t and is reported to be at $12.5/t in east coast of India.
Stock & sale average rate this week
| Port | INR/t |
| Gangavaram | 4,600 |
| Krishnapatnam | 4,700 |
| Haldia | 5,450 |
| Vizag | 4,650-4,700 |
Price excludes 5% GST and Cess
Outlook
---Market participants are of the opinion that there are chances that S.African thermal coal prices to India may move up in upcoming weeks in case sponge iron prices in the country continues to surge and South African mines prolong their production cuts.
---However, a very significant rise is unlikely due to increased availability of domestic coal and increased competition from cheaper Australian thermal coal which can be used as a substitute to South African coal especially by the cement sector.
