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India: Imported coal market turns quiet as freight rates soar

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Non Coking
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24 Feb 2021, 15:49 IST
India: Imported coal market turns quiet as freight rates soar

Indian thermal coal buyers have taken a backseat and are resisting from making import bookings amid sudden rise in freight rates and lacklustre demand from the cement and sponge sector.

The freight rates for panamax vessel between RBCT to Gangavaram port has risen by 47% w-o-w basis. Whereas, freight between Newcastle to India (east coast) has moved up by 45% against last week.

What is driving up sea freight?

The major reason for the sharp rise in freight rates is shortage of vessels owing to strong Chinese grain import demand.

As COVID-19 vaccines are being rolled out across the globe, trade is also moving back towards pre-pandemic levels and is having an impact on freight rates. There is increased demand for grains especially from world's highest populated country - China, pushing up dry bulk vessels demand from U.S. etc.

This rise in vessels demand from China coupled with snap lockdowns in Australia, U.S. and Europe is hindering the smooth flow of vessels in the long-haul routes.

Indian market sentiments

South African coal

The price rally in S.African API4 index has halted and is trending lower by $6/t at $80.4/t for March. The discounts for RB2 are being heard at $14/t and for RB3 at $26/t. However, there is no buying interest for India due to sluggish demand and increased freight rates.

CoalMint's vessel line-up data reveals about 0.37 mn t of S.African coal coming at Indian ports in next one month with none of the vessels coming at Gangavaram port which handles majority of S.African coal offtake. The thermal coal stock at Gangavaram port has risen by 2.9% w-o-w at 3.05 mn t and there is no support to portside prices from the sponge iron sector.

Australian coal

In the case of Australian coal also buyers from the cement sector have taken a backseat amid rising freight rates and relatively lesser demand. No major deals have been concluded in past few days and offers for 5500 NAR coal are at around $57/t, whereas bids are at $55/t.

About 0.48 mn t of Australian thermal coal is expected to arrive at Indian ports in next ten days, CoalMint vessel line-up reveals.

Outlook

We believe that as the pandemic wanes and demand from China improves further the freight rates are expected to remain elevated at least for a month or so. However, tepid domestic demand for coal from the sponge iron and cement sector is likely to keep Indian importers at bay for upcoming few weeks.

 

24 Feb 2021, 15:49 IST

 

 

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