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India: Input cost pressures force sponge iron units to defer RB2 portside bookings

Portside trade in the South African RB2 (5,500 NAR) grade coal continued to remain under pressure this week as sponge iron manufacturers stayed on the sidelines amidst re...

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1 Jul 2021, 19:23 IST
India: Input cost pressures force sponge iron units to defer RB2 portside bookings

Portside trade in the South African RB2 (5,500 NAR) grade coal continued to remain under pressure this week as sponge iron manufacturers stayed on the sidelines amidst reduced capacity utilisations due to input costs pressures and a consequent preference for domestic coal.

Several sponge iron units in the Chhattisgarh and Odisha clusters are reeling under the pressure of increased raw material costs (iron ore and pellets prices are up 59% and 34% respectively since Jan'21). They are heard to be largely operating at 60-65% capacity which has impacted imported South African coal demand.

Subsequently, no bulk trade for RB2 has been heard this week at the key ports. Amidst escalated RB2 prices, buyers are opting for low-calorific value (CV) RB3 (4,800 GAR) that is being sold at INR 6,700/t ex-Vizag (excluding cess and GST).

RB2 coal portside prices:

Port As on 24 June As on 1 July
Ex-Gangavaram 8,000 8,000
Ex-Mangalore 8,100 8,100
Ex-Vizag 8,000 8000
Ex-Paradip 8,500 8,500

*Prices in INR/tonne, ex-cess and GST

In case of Haldia Port, there is hardly any stock available for trade purposes due to the absence of any vessel arrival in the last one month amidst escalated Supramax freight rates. Buyers are heard to be purchasing imported coal from Dhamra Port at around INR 8,200/t (excluding cess and GST) or from Vizag Port.

No major correction despite muted demand

Despite sluggish demand, no major correction in portside RB2 prices has been seen because of limited stocks at Indian ports.

Barring a few, majority of direct importers' stocks at the various ports have been sold out. Only around 0.51 million tonnes (mn t) of South African coal is slated to arrive at Indian ports between 28 Jun-4 Jul'21. This is giving support to portside prices.

CoalMint's vessel line-up reveals, only Adani Enterprise' capsize vessel is arriving at Dhamra Port and Swiss Singapore's at Vizag Port.

Imported coal prices stable

After a continued rally for over the last one month, South African RB1 (6,000 NAR) grade coal prices have turned stable at $115/t this week, with minor fluctuations.

This is due to sluggish demand from the key markets of India and Pakistan. Prices are not seeing any major correction because of supply concerns from South Africa and demand support from China.

The discounts for RB2 and RB3 this week are assessed at $17/t and $27/t respectively for Jul'21-loading while capesize vessel freights between RBCT to Gangavaram continue to remain steady at $17/t.

Short-term outlook

CoalMint believes that South African thermal coal portside prices are likely to remain stable in the near term on depleting stocks at the ports, limited vessels arrival and sponge iron manufacturers requiring imported coal for blending purpose to keep their plant running.

 

1 Jul 2021, 19:23 IST

 

 

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