India: Thermal coal loses steam. Will other raw material prices dip too?
Following the trend seen in the last few months, prices of all key input materials for steel-making increased m-o-m in October except for iron ore, data compiled by Steel...
Following the trend seen in the last few months, prices of all key input materials for steel-making increased m-o-m in October except for iron ore, data compiled by SteelMint reveals. However, since end-October, mostly all input prices have started dipping.
Coal: The bi-weekly index tracking the average portside ex-Gangavaram prices of the South African RB2 5500 NAR reveals that, m-o-m, these rose 54% in Oct'21, the highest rise registered amongst all raw materials. This sharp uptrend had a cascading impact on all input materials, the data further reveals. Average monthly prices in October hovered at INR 17,300/tonne (t) compared to INR 11,200/t in Sept'21. Global prices stayed elevated due to the tightness in production and supply and China's increased buying of imported coal ahead of its winter heating season. However, China, the epicentre of the crisis, was quick to intervene. It allowed a floating benchmark price in the long-term contracts and also put coal in the "prohibiting exorbitant profits" category. Both factors cooled down global coal prices. In tandem, India's portside prices also started cooling from around mid-Oct'21, and, last assessed on 3 Nov'21, were down to INR 11,000/t.
The domestic G9 grade (4750 k/cal) auctioned at South Eastern Coalfields (SECL) rose almost 29% m-o-m to INR 7,200/t in Oct'21 against Sept'21's INR 5,600/t due to the continued tightness in production and supply from Coal India. SECL is yet to conduct its monthly auction for November. However, under the special forward auction meant for the power sector in November, the bid price lost steam at INR 1,277.9/t against October's INR 1,827.91/t.
Coking coal: Prices of the Australian HCC rose 15% m-o-m in October to $425/t against September's $370/t. Late last year China turned to suppliers like USA, Mozambique etc after stopping its purchases from Australia. Since these origins supplied to Europe, Japan, Latin America and South Korea, the supply crunch became pronounced, leading to price escalation. However, October prices cooled down to around $400/t.
Ferro alloys: Ferro alloys prices were the second-most affected, in a boomerang effect from coal, being a highly power-intensive business. With units in China closing down, supply issues cropped up. Silico manganese (60:14, ex-Raipur) prices rose 37% m-o-m. But, with coal cooling down, silico manganese prices have plunged since last one week to INR 117,100/t ex-Raipur. With additional domestic capacities in play, buyers are negotiating further.
Scraps and metallics: All were impacted by coal. Sponge iron is much dependent on the RB2 variety. The pellet-based P-DRI, ex-Raipur, rose 13% to INR 34,100/t in October (compared to INR 30,150/t in September). Pig iron prices also rose by 13% to INR 45850/t (INR 40,600/t) and domestic scrap (ex-Mumbai) rose 7% during this period. Local supply tightness is persisting in scrap, which is also supporting higher prices.
Steel: Higher raw material costs supported the rise in semi-finished and finished prices. For instance, the ex-Raipur billet index showed that m-o-m prices in October had risen 11% to INR 47,200/t (INR 42,500/t). The ex-Mumbai BF-grade rebar also rose 11% to INR 57,600/t (INR 51,900/t) and IF grade by 13% to INR 52,450/t (INR 46,450/t) during this period. Wire rods (ex-Durgapur) were also up 13% in this period to INR 51,050/t (INR 45,125/t). Ex-Mumbai trade level HRC prices are up 8% to INR 70,700/t (INR 65,400/t) m-o-m in October.
Iron ore: This raw material, after hitting stratospheric highs of $230/t around May globally, cooled off to around $123/t due to severe steel production cuts which weakened China appetite and lowered exports from India, dragging down domestic prices too. As a result, the Fe63% fines emerging from Odisha dropped 6% in October m-o-m to INR 6,450/t (INR 6,890/t). The Fe63% lumps (Odisha) also dipped 4% in this period. However, the Fe63% pellets (DAP Raipur) were up 19% m-o-m to INR 13,360/t in Oct'21 (INR 11,200/t). Again, despite subdued demand, domestic pellet prices stayed firm in October due to the coal inflation.
China, from where the global coal crisis emerged, has moved to quell prices. Indonesian high CV (5800 GAR) has thus moved down to $150/t on 5 Nov'21 from its peak of $217/t in mid-October. South African prices also corrected to $145/t on 5 Oct'21 from a peak of $244/t in mid-October. "Prices have peaked," say many. With coal losing steam, November may see prices dipping across all raw materials.